A risk manager analyzed fleet accident data to help determine which loss control measures would provide the greatest safety incentives for drivers. Examining data to generate information that will help make more informed decisions is called A) predictive analytics. B) catastrophe modeling. C) sensitivity analysis. D) data mining. ANSWER Answer: A
Insurance Brokerage Company uses a computer-based method of estimating the losses its clients will suffer if a severe storm or earthquake occurs. This method of estimating losses is called A) capital budgeting. B) securitization of risk. C) risk mapping. D) catastrophe modeling. ANSWER Answer: D
West Coast Insurance writes property and liability insurance in California, Oregon, and Washington. These states are all susceptible to earthquakes. To help determine how much reinsurance to purchase, West Coast Insurance hired an organization to use a computer algorithm to estimate what its insured losses would be if a severe earthquake occurred. West Coast Insurance […]
Which of the following is a financial derivative that derives value from specific insurable losses or from an index of values? A) commodity futures contract B) corporate bond C) catastrophe bond D) insurance option ANSWER Answer: D
Palmer Polymers is changing from a traditional risk management program to an enterprise risk management program. As a first step, the risk manager determined all the risks that the organization faces. Next, she created a grid with loss frequency on the x-axis and loss severity on the y-axis. Then she plotted all of the loss […]
Consolidation in the insurance industry is a continuing trend. One area where mergers and acquisitions frequently occur is between marketing intermediaries who represent insurance purchasers. These intermediaries are called A) insurance adjusters. B) insurance agents. C) insurance underwriters. D) insurance brokers. ANSWER Answer: D
Which statement is (are) true concerning catastrophe models? I. Businesses other than insurance companies use catastrophe models. II. Catastrophe models are able to precisely predict disaster occurrences and loss values. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: A
Five Below Zero is a new ski resort in Colorado. Five Below Zero is concerned that an abnormally warm winter will prevent the accumulation of snow needed to have a profitable ski season. Five Below Zero purchased a contract that will pay a lump sum if the daily high temperature exceeds 30 degrees for more […]
Which of the following statements regarding terrorism insurance is (are) true? I. There is a federal backstop if terrorism claims are catastrophic. II. Private insurers market terrorism insurance. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: C
Last year, XYZ Insurance Company had a combined ratio of 102.4 and lost $10.2 million on the insurance that it sold. The company, however, was required to pay income taxes. The best explanation for this apparent contradiction is that XYZ offset its underwriting loss with A) increased loss reserves. B) investment income. C) increased loss […]
