Page 1 of 60
CPCU 520 2026 PREP EXAM COMPLETE (277)
CURRENT TESTING QUESTIONS AND
DETAILED CORRECT
ANSWERS|GUARANTEED PASS.
CPCU
Maximize your success with this CPCU 520 Exam, designed to
assess foundational knowledge of risk management and
insurance principles. It focuses on risk identification, insurance
operations, legal principles, and industry standards. The exam
strengthens analytical thinking and professional understanding
of the insurance field. Suitable for insurance and risk
management certification candidates.
A group of insurers or reinsurers involved in joint
underwriting to insure major risks that are beyond the
capacity of a single insurer or reinsurer; each syndicate
member accepts predetermined shares of premiums,
losses, expenses, and profits. ✓ ✓ ...... ANSWER .......
Syndicate
, Page 2 of 60
An organization of member companies that reinsure by fixed
percentage the total amount of insurance appearing on
policies issued by the organization. ✓ ✓ ...... ANSWER .......
Association
The decision to reinsure those loss exposures that have an
increased probability of loss because the retention of those
loss exposures is undesirable. ✓ ✓ ...... ANSWER .......
Adverse selection
An agreement that defines the terms of the facultative
reinsurance coverage on a specific loss exposure. ✓ ✓ ......
ANSWER ....... Facultative certificate of reinsurance
A type of reinsurance in which the primary insurer and
reinsurer proportionately share the amounts of insurance,
policy premiums, and losses (including loss adjustment
expenses). ✓ ✓ ...... ANSWER ....... Pro rata
reinsurance
A ceding commission that is a fixed percentage of the ceded
premiums. ✓ ✓ ...... ANSWER ....... Flat commission
, Page 3 of 60
A ceding commission that is contingent on the reinsurer
realizing a predetermined percentage of excess profit on
ceded loss exposures. ✓ ✓ ...... ANSWER ....... Profit-
sharing commission
A ceding commission based on a formula that adjusts the
commission according to the profitability of the reinsurance
agreement. ✓ ✓ ...... ANSWER ....... Sliding scale
commission
A type of pro rata reinsurance in which the primary insurer
and the reinsurer share the amounts of insurance, policy
premiums, and losses (including loss adjustment expenses)
using a fixed percentage. ✓ ✓ ...... ANSWER .......
Quota share reinsurance
A quota share reinsurance treaty in which the cession
percentage retention varies based on specified
predetermined criteria such as the amount of insurance
needed. ✓ ✓ ...... ANSWER ....... Variable quota share
treaty
, Page 4 of 60
A ratio that measures losses and loss adjustment expenses
against earned premiums and that reflects the percentage of
premiums being consumed by losses. ✓ ✓ ...... ANSWER
....... Loss ratio
A type of pro rata reinsurance in which the policies covered
are those whose amount of insurance exceeds a stipulated
dollar amount, or line. ✓ ✓ ...... ANSWER ....... Surplus
share reinsurance
The maximum amount that the reinsurer will pay for a claim
and that is commonly stated in the reinsurance agreement.
✓ ✓ ...... ANSWER ....... Reinsurance limit
A type of reinsurance in which the primary insurer is
indemnified for losses that exceed a specified dollar
amount. ✓ ✓ ...... ANSWER ....... Excess of loss
reinsurance (nonproportional reinsurance)
The dollar amount above which the reinsurer responds to
losses. ✓ ✓ ...... ANSWER ....... Attachment point
CPCU 520 2026 PREP EXAM COMPLETE (277)
CURRENT TESTING QUESTIONS AND
DETAILED CORRECT
ANSWERS|GUARANTEED PASS.
CPCU
Maximize your success with this CPCU 520 Exam, designed to
assess foundational knowledge of risk management and
insurance principles. It focuses on risk identification, insurance
operations, legal principles, and industry standards. The exam
strengthens analytical thinking and professional understanding
of the insurance field. Suitable for insurance and risk
management certification candidates.
A group of insurers or reinsurers involved in joint
underwriting to insure major risks that are beyond the
capacity of a single insurer or reinsurer; each syndicate
member accepts predetermined shares of premiums,
losses, expenses, and profits. ✓ ✓ ...... ANSWER .......
Syndicate
, Page 2 of 60
An organization of member companies that reinsure by fixed
percentage the total amount of insurance appearing on
policies issued by the organization. ✓ ✓ ...... ANSWER .......
Association
The decision to reinsure those loss exposures that have an
increased probability of loss because the retention of those
loss exposures is undesirable. ✓ ✓ ...... ANSWER .......
Adverse selection
An agreement that defines the terms of the facultative
reinsurance coverage on a specific loss exposure. ✓ ✓ ......
ANSWER ....... Facultative certificate of reinsurance
A type of reinsurance in which the primary insurer and
reinsurer proportionately share the amounts of insurance,
policy premiums, and losses (including loss adjustment
expenses). ✓ ✓ ...... ANSWER ....... Pro rata
reinsurance
A ceding commission that is a fixed percentage of the ceded
premiums. ✓ ✓ ...... ANSWER ....... Flat commission
, Page 3 of 60
A ceding commission that is contingent on the reinsurer
realizing a predetermined percentage of excess profit on
ceded loss exposures. ✓ ✓ ...... ANSWER ....... Profit-
sharing commission
A ceding commission based on a formula that adjusts the
commission according to the profitability of the reinsurance
agreement. ✓ ✓ ...... ANSWER ....... Sliding scale
commission
A type of pro rata reinsurance in which the primary insurer
and the reinsurer share the amounts of insurance, policy
premiums, and losses (including loss adjustment expenses)
using a fixed percentage. ✓ ✓ ...... ANSWER .......
Quota share reinsurance
A quota share reinsurance treaty in which the cession
percentage retention varies based on specified
predetermined criteria such as the amount of insurance
needed. ✓ ✓ ...... ANSWER ....... Variable quota share
treaty
, Page 4 of 60
A ratio that measures losses and loss adjustment expenses
against earned premiums and that reflects the percentage of
premiums being consumed by losses. ✓ ✓ ...... ANSWER
....... Loss ratio
A type of pro rata reinsurance in which the policies covered
are those whose amount of insurance exceeds a stipulated
dollar amount, or line. ✓ ✓ ...... ANSWER ....... Surplus
share reinsurance
The maximum amount that the reinsurer will pay for a claim
and that is commonly stated in the reinsurance agreement.
✓ ✓ ...... ANSWER ....... Reinsurance limit
A type of reinsurance in which the primary insurer is
indemnified for losses that exceed a specified dollar
amount. ✓ ✓ ...... ANSWER ....... Excess of loss
reinsurance (nonproportional reinsurance)
The dollar amount above which the reinsurer responds to
losses. ✓ ✓ ...... ANSWER ....... Attachment point
