ARM 402 PRACTICE FINAL PAPER 2026 TESTED
QUESTIONS WITH FULL SOLUTION GRADED
A+
◉ An organization that operates warehouses in two locations is
using the risk control technique of
A) Diversification
B) Separation
C) Duplication
D) Loss prevention. Answer: B
◉ A large deductible is similar to a self-insured retention (SIR) in
that both
A) Give the insurer complete control over claim handling
B) Provide detailed reports to the insurer on all claims
C) Require the insured organization to retain a relatively large
amount of loss
D) Require that the insured adjust and pay claims up to the
deductible or SIR amount. Answer: C
,◉ In a legal dispute between parties from different countries, which
one of the following sets of issues must be considered?
A) Jurisdiction and legal system
B) Comity and political implications
C) Political implications and future trade
D) Jurisdiction and comity. Answer: D
◉ Pools can help an organization meet which one of the following
risk financing goals through economies of scale in administration
and the purchase of excess insurance or reinsurance?
A) Maintain liquidity
B) Pay for losses
C) Minimize the costs of risk
D) Manage uncertainty. Answer: C
◉ A U.S. based company that has international operations may use a
controlled master program to insure all of its operations. Which one
of the following statements regarding a controlled master program
is true?
A) Usually there are separate policies for the domestic U.S.
exposures
, B) Excess and umbrella liability apply only to coverage on U.S.
operations
C) The master policy is excess over locally purchased admitted
coverage and can be no broader than the underlying policies
D) The U.S. company is required to purchase all of the coverages
through locally admitted insurers. Answer: A
◉ A rating plan that adjusts the premium for the current policy
period to recognize the loss experience of the insured organization
during past policy periods is
A) A finite insurance rating plan
B) An experience rating plan
C) A retrospective rating plan
D) A minimum premium rating plan. Answer: B
◉ In both noninsurance risk control and noninsurance risk
financing transfers
A) The transfer becomes effective only when the transferee actually
performs the action that rids the transferor of risk
B) A contract is usually formed before any loss occurs
C) The transferor has protection regardless of the transferee's
bankruptcy
QUESTIONS WITH FULL SOLUTION GRADED
A+
◉ An organization that operates warehouses in two locations is
using the risk control technique of
A) Diversification
B) Separation
C) Duplication
D) Loss prevention. Answer: B
◉ A large deductible is similar to a self-insured retention (SIR) in
that both
A) Give the insurer complete control over claim handling
B) Provide detailed reports to the insurer on all claims
C) Require the insured organization to retain a relatively large
amount of loss
D) Require that the insured adjust and pay claims up to the
deductible or SIR amount. Answer: C
,◉ In a legal dispute between parties from different countries, which
one of the following sets of issues must be considered?
A) Jurisdiction and legal system
B) Comity and political implications
C) Political implications and future trade
D) Jurisdiction and comity. Answer: D
◉ Pools can help an organization meet which one of the following
risk financing goals through economies of scale in administration
and the purchase of excess insurance or reinsurance?
A) Maintain liquidity
B) Pay for losses
C) Minimize the costs of risk
D) Manage uncertainty. Answer: C
◉ A U.S. based company that has international operations may use a
controlled master program to insure all of its operations. Which one
of the following statements regarding a controlled master program
is true?
A) Usually there are separate policies for the domestic U.S.
exposures
, B) Excess and umbrella liability apply only to coverage on U.S.
operations
C) The master policy is excess over locally purchased admitted
coverage and can be no broader than the underlying policies
D) The U.S. company is required to purchase all of the coverages
through locally admitted insurers. Answer: A
◉ A rating plan that adjusts the premium for the current policy
period to recognize the loss experience of the insured organization
during past policy periods is
A) A finite insurance rating plan
B) An experience rating plan
C) A retrospective rating plan
D) A minimum premium rating plan. Answer: B
◉ In both noninsurance risk control and noninsurance risk
financing transfers
A) The transfer becomes effective only when the transferee actually
performs the action that rids the transferor of risk
B) A contract is usually formed before any loss occurs
C) The transferor has protection regardless of the transferee's
bankruptcy
