ABC Insurance retains the first $1 million of each property damage loss and purchases reinsurance for that part of any property loss that exceeds $1 million. The insurance for property losses above $1 million is called A) excess insurance. B) liability insurance. C) coinsurance. D) primary insurance. ANSWER Answer: A
Date: September 19th, 2020
Which of the following is a source of information a risk manager could use to help identify pure loss exposures? A) commodity prices B) physical inspections C) currency exchange rates D) interest rate movements ANSWER Answer: B
Date: September 19th, 2020
The worst loss that is likely to happen is referred to as the A) maximum possible loss. B) probable maximum loss. C) frequency of loss. D) severity of loss. ANSWER Answer: B
Date: September 19th, 2020
The worst loss that could ever happen to a firm is referred to as the A) maximum possible loss. B) probable maximum loss. C) frequency of loss. D) severity of loss. ANSWER Answer: A
Date: September 19th, 2020
Which of the following is an example of private insurance? A) unemployment insurance B) Social Security C) life insurance D) federal deposit insurance ANSWER Answer: C
Date: September 19th, 2020
Abandoning an existing loss exposure is an example of A) avoidance. B) retention. C) noninsurance transfer. D) insurance transfer. ANSWER Answer: A
Date: September 19th, 2020
If insurers were to provide indemnification for losses that were deliberately caused, which characteristic of ideally insurable risks would not be met? A) The loss must be accidental and unintentional. B) The loss must be determinable and measurable. C) The loss should not be catastrophic. D) There must be a large number of similar exposure […]
Date: September 19th, 2020
Which of the following statements regarding the use of retention is (are) true? I. Retention is best used for loss exposures that have a low frequency and a high severity. II. A financially strong firm can have a higher retention level than a firm whose financial position is weak. A) I only B) II only […]
Date: September 19th, 2020
Which of the following statements regarding insurance and hedging is true? A) Both insurance and hedging deal only with pure risks. B) Insurance reduces objective risk while hedging involves only risk transfer and not risk reduction. C) Hedging reduces objective risk while insurance involves only risk reduction and not risk transfer. D) Both insurance and […]
Date: September 19th, 2020
Which of the following conditions is (are) appropriate for using retention? I. Losses are difficult to predict. II. The worst possible loss is not serious. A) I only B) II only C) both I and II D) neither I nor II ANSWER Answer: B
Date: September 19th, 2020
