CAIB 2 Full Study Guide| Ques ons and answers |
Updated 2026| New Edi on
The three amounts to be considered when calcula ng the amount of payment as outlined in the
Indemnity Agreement are:
1) the value of the lost or damaged property (ACV)
2) the interest of the insured in the property (ex. financial interest, home, mortgage)
3) the amount of insurance specified on the "Declara ons Page" for the loss or damaged
property (least amount|)
Iden fy the four categories that buildings may fall into:
Residen al (ex. home)
Non-mercan le (ex. hospitals, nursing homes)
Mercan le (ex. drycleaners, bakeries)
Manufacturing/Industrial (ex. autobody shops)
Three classes of property commercially insured are:
building, stock, equipment
Iden fy the two bases that coverage can be provided on:
Scheduled
All property
Property of every descrip on
Iden fy and give an example of each of the five types of property contained in the defini on of
Building found in the IBC Commercial Property Broad Form
1) Growing plants, trees, shrubs INSIDE the building used for decora ve purposes only when
insured is the owner of the building (ex. cactus)
2) Materials and equipment supplies ON the premises for maintenance (ex. lumbar, glass)
3) Addi ons and extensions IN CONTACT with the building (enclosed walk-way between
buildings)
,4) Permanent fi9ngs and fixtures ATTACHED and FORMING part of the building. (ex. light
fixtures, carpe ng)
5) Fixed structures PERTAINING to building and located on the premises (ex. fence)
[GMAPF]
Iden fy the three condi ons pertaining to the coverage for growing plants, trees, etc.
- such property was INSIDE the building
- was being used for decora ve purposes
- insured was the owner of the building
Iden fy and give an example of the three types of property contained in the defini on of Stock
found in the IBC Commercial Property Broad Form:
1) packing, wrapping and adver sing materials (ex. bubble plas c, Styrofoam)
2) merchandise of every descrip on USUAL to insureds business (ex. goods for sale for business)
3) similar property belonging to others which the insured is under obliga on to keep insured or
for which he is legally liable for (appliance if appliance store.
[PMS]
Iden fy the three condi ons that need to be present before 'similar property belonging to
others' will be insured under the defini on of Stock:
1) must be similar to that insured by the policy
2) the insured must have had an obliga on to keep the property insured
3) the insured must be legally liable for it.
Iden fy and give an example of each of the three types of property contained in the defini on
of Equipment found in the IBC Commercial Property Broad Form:
1) generally all contents USUAL to insureds business, other than building or stock (ex. furniture)
2) similar property belonging to others which the insured is under obliga on to keep insured or
for which he is legally liable for (ex. shaw cable box)
3) tenants improvements (ex. space rented out or leased, malls)
[GST]
,Iden fy the three ways in which property may be valued:
Actual Cash Value (ACV)
Replacement Value
Book Value
Which way is NOT an appropriate means of valuing property for insurance purposes?
Book Value
Iden fy the one word that can summarize the difference between Actual Cash Value and
Replacement Cost:
deprecia on
Who does the onus rest upon to establish the amount of insurance required?
the Insured
Iden fy the five methods that may be used to determine Actual Cash Value:
1) Actual Cash Value
2) True Value to customer
3) Market Value/Direct Sales Approach
4) Income Approach
5) Formula/Cost Approach Method
Iden fy the two types of deprecia on used in the Formula/Cost Approach, and give an example
of a type of property that would be appropriate using each:
Straight Line Deprecia on (ex. buildings)
&
Plateau Accelerated Deprecia on (ex. cars, furniture)
A licensed real estate appraiser will generally be consulted to provide an expert opinion when
establishing Market Value/Direct Sales Approach. Iden fy the three items he or she may
consider:
Property before the loss
Property aFer the loss
the land
When is the Income Approach method most commonly employed?
This method of evalua ng a loss is commonly used with income producing proper es
, The Broad Evidence es together the previous four methods when establishing actual cash
value, and the courts will take into account many different factors. Iden fy any three such
factors:
Market Value -assessed valua on
Rental Value -use of building
Loca on -resale success, replacement value less deprecia on {any of these}
Insurers can reduce their amount of exposure on large risks by the use of Reinsurance or
Subscrip on polies. Outline three rules, or guidelines that apply when reinsurance is used to
provide insurance coverages:
1) all insurers share premiums collected and losses incurred
2) the policy is controlled by the primary insurer and all claims are paid by it
3) the contract is between the primary insurer and the reinsurer
Iden fy four instances when subscrip on policies may be issued:
- the broker wants to spread a good large line of business among markets
- the line of business is so SPECIALIZED, its not covered by the insurers treaty with its reinsurers
- the type of risk is one which the insurer does not want to expose to its reinsurance trea es
- the limits do not exceed insurers net reten on limits but are beyond what it is prepared to pay
in a single claim.
Iden fy two characteris cs shared by all subscrip on polices:
- both share premiums and losses
- each agreement is usually required to be nego ated separately
Briefly describe the role of the LEAD company in a subscrip on policy:
the lead company normally issues the policy and provides all policyholder services, including
the handling of claims
Iden fy from the brokers point of view which method is preferred where the insurers can
reduce their amount of exposures on large risks:
Reinsurance
Updated 2026| New Edi on
The three amounts to be considered when calcula ng the amount of payment as outlined in the
Indemnity Agreement are:
1) the value of the lost or damaged property (ACV)
2) the interest of the insured in the property (ex. financial interest, home, mortgage)
3) the amount of insurance specified on the "Declara ons Page" for the loss or damaged
property (least amount|)
Iden fy the four categories that buildings may fall into:
Residen al (ex. home)
Non-mercan le (ex. hospitals, nursing homes)
Mercan le (ex. drycleaners, bakeries)
Manufacturing/Industrial (ex. autobody shops)
Three classes of property commercially insured are:
building, stock, equipment
Iden fy the two bases that coverage can be provided on:
Scheduled
All property
Property of every descrip on
Iden fy and give an example of each of the five types of property contained in the defini on of
Building found in the IBC Commercial Property Broad Form
1) Growing plants, trees, shrubs INSIDE the building used for decora ve purposes only when
insured is the owner of the building (ex. cactus)
2) Materials and equipment supplies ON the premises for maintenance (ex. lumbar, glass)
3) Addi ons and extensions IN CONTACT with the building (enclosed walk-way between
buildings)
,4) Permanent fi9ngs and fixtures ATTACHED and FORMING part of the building. (ex. light
fixtures, carpe ng)
5) Fixed structures PERTAINING to building and located on the premises (ex. fence)
[GMAPF]
Iden fy the three condi ons pertaining to the coverage for growing plants, trees, etc.
- such property was INSIDE the building
- was being used for decora ve purposes
- insured was the owner of the building
Iden fy and give an example of the three types of property contained in the defini on of Stock
found in the IBC Commercial Property Broad Form:
1) packing, wrapping and adver sing materials (ex. bubble plas c, Styrofoam)
2) merchandise of every descrip on USUAL to insureds business (ex. goods for sale for business)
3) similar property belonging to others which the insured is under obliga on to keep insured or
for which he is legally liable for (appliance if appliance store.
[PMS]
Iden fy the three condi ons that need to be present before 'similar property belonging to
others' will be insured under the defini on of Stock:
1) must be similar to that insured by the policy
2) the insured must have had an obliga on to keep the property insured
3) the insured must be legally liable for it.
Iden fy and give an example of each of the three types of property contained in the defini on
of Equipment found in the IBC Commercial Property Broad Form:
1) generally all contents USUAL to insureds business, other than building or stock (ex. furniture)
2) similar property belonging to others which the insured is under obliga on to keep insured or
for which he is legally liable for (ex. shaw cable box)
3) tenants improvements (ex. space rented out or leased, malls)
[GST]
,Iden fy the three ways in which property may be valued:
Actual Cash Value (ACV)
Replacement Value
Book Value
Which way is NOT an appropriate means of valuing property for insurance purposes?
Book Value
Iden fy the one word that can summarize the difference between Actual Cash Value and
Replacement Cost:
deprecia on
Who does the onus rest upon to establish the amount of insurance required?
the Insured
Iden fy the five methods that may be used to determine Actual Cash Value:
1) Actual Cash Value
2) True Value to customer
3) Market Value/Direct Sales Approach
4) Income Approach
5) Formula/Cost Approach Method
Iden fy the two types of deprecia on used in the Formula/Cost Approach, and give an example
of a type of property that would be appropriate using each:
Straight Line Deprecia on (ex. buildings)
&
Plateau Accelerated Deprecia on (ex. cars, furniture)
A licensed real estate appraiser will generally be consulted to provide an expert opinion when
establishing Market Value/Direct Sales Approach. Iden fy the three items he or she may
consider:
Property before the loss
Property aFer the loss
the land
When is the Income Approach method most commonly employed?
This method of evalua ng a loss is commonly used with income producing proper es
, The Broad Evidence es together the previous four methods when establishing actual cash
value, and the courts will take into account many different factors. Iden fy any three such
factors:
Market Value -assessed valua on
Rental Value -use of building
Loca on -resale success, replacement value less deprecia on {any of these}
Insurers can reduce their amount of exposure on large risks by the use of Reinsurance or
Subscrip on polies. Outline three rules, or guidelines that apply when reinsurance is used to
provide insurance coverages:
1) all insurers share premiums collected and losses incurred
2) the policy is controlled by the primary insurer and all claims are paid by it
3) the contract is between the primary insurer and the reinsurer
Iden fy four instances when subscrip on policies may be issued:
- the broker wants to spread a good large line of business among markets
- the line of business is so SPECIALIZED, its not covered by the insurers treaty with its reinsurers
- the type of risk is one which the insurer does not want to expose to its reinsurance trea es
- the limits do not exceed insurers net reten on limits but are beyond what it is prepared to pay
in a single claim.
Iden fy two characteris cs shared by all subscrip on polices:
- both share premiums and losses
- each agreement is usually required to be nego ated separately
Briefly describe the role of the LEAD company in a subscrip on policy:
the lead company normally issues the policy and provides all policyholder services, including
the handling of claims
Iden fy from the brokers point of view which method is preferred where the insurers can
reduce their amount of exposures on large risks:
Reinsurance
