The process of determining which set of investments in plant and equipment to undertake is called A) regression analysis. B) loss forecasting. C) time value of money analysis D) capital budgeting. ANSWER Answer: D
Date: September 19th, 2020
Which of the following statements is true regarding insurance market conditions and underwriting results? A) A combined ratio greater than one (or 100 percent) indicates profitable underwriting. B) In a “soft” insurance market, more retention is used than in a “hard” insurance market. C) Insurance rates are high and underwriting standards are tight when the […]
Date: September 19th, 2020
Which of the following statements is (are) true regarding investment returns and the underwriting cycle? I. Investment returns have no impact upon the underwriting cycle. II. Investment returns can lengthen the duration of a soft market by offsetting underwriting losses. A) I only B) II only C) both I and II D) neither I nor […]
Date: September 19th, 2020
The property and liability insurance industry fluctuates between periods of increasing insurance rates and tight underwriting standards, and decreasing insurance rates and loose underwriting standards. Profitability in the industry follows these cyclical movements. What is this pattern of fluctuations called? A) the claims cycle B) the underwriting cycle C) the business cycle D) the accounting […]
Date: September 19th, 2020
The relative level of surplus in the insurance industry is called the industry’s A) capacity. B) liabilities. C) reserves. D) admitted assets. ANSWER Answer: A
Date: September 19th, 2020
A risk manager was asked to review all the loss exposures his company faces. The risk manager noted that the company obtained over 90 percent of its raw materials from one supplier. He voiced concern about business interruption if that supplier was closed for some reason. Acting on his recommendation, the company began to purchase […]
Date: September 19th, 2020
A company has a fleet of 200 vehicles. On average, 50 vehicles per year experience property damage. What is the probability that any vehicle will be damaged in any given year? A) 10 percent B) 20 percent C) 25 percent D) 50 percent ANSWER Answer: C
Date: September 19th, 2020
Melanie was just hired as the risk manager of JKL Company. The company president asked her to make a thorough review of all of the company’s loss exposures. Melanie noted that many employees were too heavily invested in stock issued by the company in their 401-k plan. Melanie suggested that the employees change some of […]
Date: September 19th, 2020
RST Company has production facilities in Salt Lake City and Cleveland. The probability that in any given year a fire will damage the production facility in Salt Lake City is 5 percent. The probability that in any given year a fire will damage the Cleveland production facility is 4 percent. What is the probability that […]
Date: September 19th, 2020
A college professor stores class grading records on a spreadsheet on her office computer. Each time she updates a grading file she makes a printout and a backup copy of the grading file. The professor is using which risk management method to address the risk of losing her class grading records? A) risk avoidance B) […]
Date: September 19th, 2020
