1|Page
INSURANCE LEVEL 1 TEST ALBERTA 2026-LATEST
COMPLETE EXAM SET WITH QUESTIONS AND
VERIFIED ANSWERS
Reinsurance - correct-answer -Insurance purchased by an insurance company
from another insurance company (reinsurer) to provide it protection against large
losses on cases it has already insured. Insurance of insurance companies. A
transaction where the reinsurer agrees to indemnify another party (the reinsured)
in consideration of a premium paid to it for all or some liability.. The reinsured is
the primary or ceding company.
Cede - correct-answer -When a company reinsures its liability with another
company.
cession - correct-answer -The cession is the amount that has been ceded through
reinsurance.
Retention - correct-answer -The amount of liability the ceding company (primary
insurer) retains for its own account. May be a % or $ amount.
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retrocede (retrocession) - correct-answer -To cede a part of a risk to another
insurer or reinsurer. Insurance for Reinsurance companies. 3rd generation.
retrocessionaire - correct-answer -The reinsurance company that accepts a
retrocession from another company.
5 reasons to Reinsure - correct-answer -1) To increase the insurers capacity to
write business. Able to write a higher level of risk then it would be able to on its
own.
2) To maintain a proper reserve/liability balance.
3) Reduce the effects of a catastrophic loss
4) Provide stability in a fluctuating market
5) To enable an insurer to cease operations. Companies withdrawing from a
market.
2 Methods of Reinsuring - correct-answer -1) proportional reinsurance.
2) Non-proportional reinsurance.
proportional reinsurance - correct-answer -A percentage of risk is transferred to a
reinsurer and the reinsurer receives the same percentage of premium and is
responsible for the same percentage of each loss
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non-proportional reinsurance. - correct-answer -The reinsurance's portion of loss
depends on the size of the loss. IE. Reinsurer may cover losses about 50000 but
not more than 100000
2 types of Reinsurance - correct-answer -1) Treaty Reinsurance
2) Facultative Reinsurance
Treaty Reinsurance - correct-answer -An agreement between an insurance
company and insurance company. The Reinsurer automatically accepts a portion
of the ceding company's liability for a specified class or classes of business. Terms
of agreement are already established for loss limits, premium payment etc.
Facultative Reinsurance - correct-answer -Reinsurance of risk on a case by case
basis subject to acceptance or rejection by the insurer.
Functions of intermedary's - correct-answer -1) Employed agents (Direct) Do not
provided producer services.
2) Independent agents- limited claims.
3) Brokers- Claims, loss control, and other functions
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Law of Principal & Agent between brokers and insurance companies - correct-
answer -1) Agents/Brokers are contracted to act on behalf of the insurance
companies within the guidelines of the agency/brokerage contract.
2) Insurance companies are obligated to the insureds through the contracts
created by the agents/brokers.
How utmost good faith is related to a broker's duty of care to insurers and clients -
correct-answer -Brokers must disclose all material information to the insurers but
also must explain all coverages or lack thereof to the insured and make
recommendations that will protect them from exposures.
Ways insurance & brokerages are the same as other businesses - correct-answer -
1) Subject to the same laws as other businesses
2) Incorporation, income taxes, consumer protection and employment regulations
are the same.
Solvency - correct-answer -A business entity's ability to meet it's long-term
financial commitments.
INSURANCE LEVEL 1 TEST ALBERTA 2026-LATEST
COMPLETE EXAM SET WITH QUESTIONS AND
VERIFIED ANSWERS
Reinsurance - correct-answer -Insurance purchased by an insurance company
from another insurance company (reinsurer) to provide it protection against large
losses on cases it has already insured. Insurance of insurance companies. A
transaction where the reinsurer agrees to indemnify another party (the reinsured)
in consideration of a premium paid to it for all or some liability.. The reinsured is
the primary or ceding company.
Cede - correct-answer -When a company reinsures its liability with another
company.
cession - correct-answer -The cession is the amount that has been ceded through
reinsurance.
Retention - correct-answer -The amount of liability the ceding company (primary
insurer) retains for its own account. May be a % or $ amount.
,2|Page
retrocede (retrocession) - correct-answer -To cede a part of a risk to another
insurer or reinsurer. Insurance for Reinsurance companies. 3rd generation.
retrocessionaire - correct-answer -The reinsurance company that accepts a
retrocession from another company.
5 reasons to Reinsure - correct-answer -1) To increase the insurers capacity to
write business. Able to write a higher level of risk then it would be able to on its
own.
2) To maintain a proper reserve/liability balance.
3) Reduce the effects of a catastrophic loss
4) Provide stability in a fluctuating market
5) To enable an insurer to cease operations. Companies withdrawing from a
market.
2 Methods of Reinsuring - correct-answer -1) proportional reinsurance.
2) Non-proportional reinsurance.
proportional reinsurance - correct-answer -A percentage of risk is transferred to a
reinsurer and the reinsurer receives the same percentage of premium and is
responsible for the same percentage of each loss
,3|Page
non-proportional reinsurance. - correct-answer -The reinsurance's portion of loss
depends on the size of the loss. IE. Reinsurer may cover losses about 50000 but
not more than 100000
2 types of Reinsurance - correct-answer -1) Treaty Reinsurance
2) Facultative Reinsurance
Treaty Reinsurance - correct-answer -An agreement between an insurance
company and insurance company. The Reinsurer automatically accepts a portion
of the ceding company's liability for a specified class or classes of business. Terms
of agreement are already established for loss limits, premium payment etc.
Facultative Reinsurance - correct-answer -Reinsurance of risk on a case by case
basis subject to acceptance or rejection by the insurer.
Functions of intermedary's - correct-answer -1) Employed agents (Direct) Do not
provided producer services.
2) Independent agents- limited claims.
3) Brokers- Claims, loss control, and other functions
, 4|Page
Law of Principal & Agent between brokers and insurance companies - correct-
answer -1) Agents/Brokers are contracted to act on behalf of the insurance
companies within the guidelines of the agency/brokerage contract.
2) Insurance companies are obligated to the insureds through the contracts
created by the agents/brokers.
How utmost good faith is related to a broker's duty of care to insurers and clients -
correct-answer -Brokers must disclose all material information to the insurers but
also must explain all coverages or lack thereof to the insured and make
recommendations that will protect them from exposures.
Ways insurance & brokerages are the same as other businesses - correct-answer -
1) Subject to the same laws as other businesses
2) Incorporation, income taxes, consumer protection and employment regulations
are the same.
Solvency - correct-answer -A business entity's ability to meet it's long-term
financial commitments.
