5. Risk Management

Reinsurance — Quiz

Test your understanding of reinsurance with 5 practice questions.

Practice Questions

Question 1

Which reinsurance structure involves the reinsurer covering a specified percentage of each risk and premium, often used to share both profits and losses proportionally?

Question 2

A primary insurer has an excess-of-loss reinsurance treaty with a retention limit of $$ \$1,500,000 $ and a reinsurance limit of $ \$3,000,000 $ in excess of the retention. If a total loss of $ \$4,000,000 $$ occurs, what is the reinsurer's payment?

Question 3

What is the primary reason a primary insurer might choose to use facultative reinsurance for a specific, high-value risk rather than relying solely on a treaty reinsurance agreement?

Question 4

In the context of reinsurance pricing, what is the significance of the 'exposure curve' or 'loss severity distribution' for non-proportional treaties?

Question 5

A primary insurer has a stop-loss reinsurance treaty with an attachment point of $$ \$5,000,000 $ and a limit of $ \$3,000,000 $. If the primary insurer's aggregate net losses for the year amount to $ \$9,000,000 $$, how much will the reinsurer pay?