Michigan Surplus Lines Insurance Exam Prep
COMPREHENSIVE questions answered, 2025 verified
graded A+ already passed!
(1)Surplus Lines premiums typically expand during:
A) A soft Market
B) A Hard Market - (ANSWER)A Hard Market.
Surplus lines premiums typically expand during a hard market.
(2) During the time of a hard market, insurers will:
A) Tighten their underwriting standards
B) Loosen their underwriting standards - (ANSWER)A) Tighten their underwriting
standards.
Tighten and raise premiums.
(3) A Ceding company (Choose all that apply):
A) Is a primary insurer
B) Is also a reinsurer
C) Is always also a captive company
D) Passes on to other insurers some part of its risk under insurance policies it has
accepted
,E) Will not be held liable to pay the claims in the event of default by the reinsurer.
- (ANSWER)A) Is primary Insurer
D) Passes on to other insurers some of its risk under insurance policies it has
accepted
(4) An insurers appetite to write business is often measured by:
A) Its risk class
B) Its status
C) Its financial strength
D)Its premium to surplus ratio - (ANSWER)D) Its premium to surplus ratio
(5) A surplus lines insurer:
A) Has to be licensed and admitted in the same state as the broker
B) Is not always licensed or admitted in the same state as the broker -
(ANSWER)B) Is not always licensed or admitted in the same state as the broker
(6) Karl the fortune teller believes that the world is full of uncertainty, and so is
his destiny. He often engages himself in extreme sports activities for fun and for
challenge. He thinks he will need more insurance coverage in the future. He
prefers a surplus line policy.
A) This is a good idea
B) This is probably not a good idea - (ANSWER)B) This is probably not a good idea
,Surplus lines is for hard to place risk. nothing about this is really hard to place, and
he should maybe just buy more life insurance.
(7) A domestic surplus lines company must be licensed in at least one state or
other US jurisdiction.
True or False - (ANSWER)True
(8) When a surplus lines insurance for coverage in this state is not placed through
a licensed surplus lines agent here,
A) The transaction is a foreign transaction that is still technically lawful
B) The transaction would still qualify as the lawful transaction of surplus lines
insurance
C) The transaction would not qualify as the lawful transaction of surplus lines
insurance - (ANSWER)C) The transaction would not qualify as the lawful
transaction of surplus lines insurance
(9) The Terrorism Risk Insurance Act (TRIA):
A) Applies to surplus lines policies
B) Does not apply to surplus lines policies - (ANSWER)A) Applies to surplus lines
policies.
(10) A surplus lines policy:
A) Is still covered by the state guaranty fund when placed locally
, B) Is covered by the state guaranty fund as long as it is placed via a licensed
broker or agent.
C) Is not covered by the state guaranty fund - (ANSWER)C) Is not covered by the
state guaranty fund
(11) For surplus lines insurers, the relative freedom from form and rate regulation
give:
A)Flexibility
B) Legal Waiver
C) Cost Advantage
D) The right of non-disclosure - (ANSWER)A) Flexibility
(12) In the context of insurance, losses depend primarily on which two variables:
A) The background
B) The number of losses
C) The amount involved
D) The nature of events
E) The policy - (ANSWER)B) The number of losses
C) The amount involved
(13) Who must verify the financial strength and viability of a nonadmitted
insurer?
A) The insurance commission
COMPREHENSIVE questions answered, 2025 verified
graded A+ already passed!
(1)Surplus Lines premiums typically expand during:
A) A soft Market
B) A Hard Market - (ANSWER)A Hard Market.
Surplus lines premiums typically expand during a hard market.
(2) During the time of a hard market, insurers will:
A) Tighten their underwriting standards
B) Loosen their underwriting standards - (ANSWER)A) Tighten their underwriting
standards.
Tighten and raise premiums.
(3) A Ceding company (Choose all that apply):
A) Is a primary insurer
B) Is also a reinsurer
C) Is always also a captive company
D) Passes on to other insurers some part of its risk under insurance policies it has
accepted
,E) Will not be held liable to pay the claims in the event of default by the reinsurer.
- (ANSWER)A) Is primary Insurer
D) Passes on to other insurers some of its risk under insurance policies it has
accepted
(4) An insurers appetite to write business is often measured by:
A) Its risk class
B) Its status
C) Its financial strength
D)Its premium to surplus ratio - (ANSWER)D) Its premium to surplus ratio
(5) A surplus lines insurer:
A) Has to be licensed and admitted in the same state as the broker
B) Is not always licensed or admitted in the same state as the broker -
(ANSWER)B) Is not always licensed or admitted in the same state as the broker
(6) Karl the fortune teller believes that the world is full of uncertainty, and so is
his destiny. He often engages himself in extreme sports activities for fun and for
challenge. He thinks he will need more insurance coverage in the future. He
prefers a surplus line policy.
A) This is a good idea
B) This is probably not a good idea - (ANSWER)B) This is probably not a good idea
,Surplus lines is for hard to place risk. nothing about this is really hard to place, and
he should maybe just buy more life insurance.
(7) A domestic surplus lines company must be licensed in at least one state or
other US jurisdiction.
True or False - (ANSWER)True
(8) When a surplus lines insurance for coverage in this state is not placed through
a licensed surplus lines agent here,
A) The transaction is a foreign transaction that is still technically lawful
B) The transaction would still qualify as the lawful transaction of surplus lines
insurance
C) The transaction would not qualify as the lawful transaction of surplus lines
insurance - (ANSWER)C) The transaction would not qualify as the lawful
transaction of surplus lines insurance
(9) The Terrorism Risk Insurance Act (TRIA):
A) Applies to surplus lines policies
B) Does not apply to surplus lines policies - (ANSWER)A) Applies to surplus lines
policies.
(10) A surplus lines policy:
A) Is still covered by the state guaranty fund when placed locally
, B) Is covered by the state guaranty fund as long as it is placed via a licensed
broker or agent.
C) Is not covered by the state guaranty fund - (ANSWER)C) Is not covered by the
state guaranty fund
(11) For surplus lines insurers, the relative freedom from form and rate regulation
give:
A)Flexibility
B) Legal Waiver
C) Cost Advantage
D) The right of non-disclosure - (ANSWER)A) Flexibility
(12) In the context of insurance, losses depend primarily on which two variables:
A) The background
B) The number of losses
C) The amount involved
D) The nature of events
E) The policy - (ANSWER)B) The number of losses
C) The amount involved
(13) Who must verify the financial strength and viability of a nonadmitted
insurer?
A) The insurance commission
