AFSB 151 Practice Exams

AFSB 151 Practice Exams Any promise to answer for another person's debts or defaults, including the promise that a surety makes to the obligee under a bond, derives from which one of these? - Statutes of frauds Following the Civil War, the growing number and complexity of financial/commercial relationships led to the need for - Commercial suretyship. In accordance with a contract to build a county shed for the Village of Malcom, Raymone Construction purchases a contract surety bond from SureRite Insurance. Identify the principal, obligee, and surety in this suretyship. - Principal--Raymone Construction; obligee--Village of Malcom; Surety--SureRite Insurance The two basic types of bonds that are written today are - Contract surety bonds and commercial surety bonds Sureties use what written document to authorize a producer to act as the surety's agent in bond production? - A power of attorney When evaluating a surety claim, claims representatives are often assisted by outside legal counsel. What other professionals assist claims representatives? - Engineers Suretyship and banking are alike in that - Neither expects to suffer a loss Suretyship and insurance are alike in that - Insurance commissioners regulate both. In the surety bond three-party relationship, the party who is primarily responsible for fulfilling the obligation and who typically has control of the obligation is the - Principal Because most bonds are "joint and several liability" documents, the obligee can recover losses from - The principal or the surety, or from both. A financial guarantee differs from performance and fidelity guarantees because it requires honesty, the ability to perform the contract, and - The ability to pay money to meet the contractual obligation. Instead of holding a principal's assets as security, a surety might choose to hold an instrument issued by a commercial bank for the principal, but with the surety named as the beneficiary. What is this instrument? - An irrevocable standby letter of credit A type of reinsurance transaction that involves an agreement between the primary insurer and the reinsurer specifying how to transfer risks, that defines the eligible risks in terms of lines and classes of business, that specifies the parties' obligations, and for which eligible risks are automatically reinsured, is - Treaty reinsurance Which of these statements regarding the principal allocation methods for reinsurance of surety bonds is accurate? - Both facultative and treaty reinsurance of bonds can be written as pro rata or excess of loss. A basic type of bond that involves all situations in which sureties guarantee performance of obligations that generally do not arise from contracts is - Commercial surety bonds. Which one of the following developed in the United States to guarantee the large amounts of money involved in the country's industrial and commercial growth? - Corporate suretyship The establishment of the formal contract between the surety, principal, and obligee that is offered to the principal is called - Execution of a bond While suretyship and banking both use a prequalification process to extend credit to their customers, suretyship is different from bank credit in that - Suretyship guarantees performance as well as monetary obligations. Except in the case of a forfeiture bond, if the principal defaults, the surety will pay - Up to the bond penalty, but no more than the obligee's actual loss amount.