Michigan Surplus Lines Insurance Exam
Questions and Verified Correct Answers
graded A+ 2026
(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
Questions and Verified Correct Answers
graded A+ 2026
(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
