AFSB 151 TEST PAPER EXAM TIP QUESTIONS
AND ANSWERS SURE A+
✔✔treaty reinsurance - ✔✔a reinsurance agreement that covers an entire class or
portfolio of loss exposures and provides that the primary insurer's individual loss
exposures that fall within the treaty are automatically reinsured
✔✔facultative reinsurance - ✔✔reinsurance of individual loss exposures in which the
primary insurer chooses which loss exposures to submit the the reinsurer, and the
reinsurer can accept or reject any loss exposures submitted
✔✔facultative certificate of reinsurance - ✔✔an agreement that defines the terms of the
facultative reinsurance coverage on a specific loss exposure
✔✔pro rate 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)
✔✔loss adjustment expense (LAE) - ✔✔the expense that an insurer incurs the
investigate, defend, and settle claims according to the terms specified in the insurance
policy
✔✔profit-sharing commision - ✔✔a ceding commission that is contingent on the
reinsurer realizing a predetermined percentage of excess profit on ceded loss
exposures
✔✔quota share reinsurance - ✔✔a type of pro rate 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
, ✔✔surplus share reinsurance - ✔✔a type of pro rate reinsurance in which the policies
covered are those whose amount of insurance exceeds a stipulated monetary amount,
or line
✔✔excess of loss reinsurance - ✔✔a type of reinsurance in which the primary insurer is
indemnified for losses that exceed a specified monetary amount
✔✔attachment point - ✔✔the monetary amount above which the reinsurer responds to
losses
✔✔working cover - ✔✔an excess of loss reinsurance agreement with a low attachment
point
✔✔per risk excess of loss reinsurance - ✔✔a type of excess of loss reinsurance that
covers property insurance and that applies separately to each loss occurring to each
risk
✔✔catastrophe excess of loss reinsurance - ✔✔a type of excess of loss reinsurance
that protect the primary insurer from an accumulation of retained losses that arise from
a single catastrophic event
✔✔per policy excess of loss reinsurance - ✔✔a type of excess of loss reinsurance that
applied the attachment point and the reinsurance limit separately to each insurance
policy issued by the primary insurer regardless of the number of losses occurring under
each policy
✔✔per occurrence excess of loss reinsurance - ✔✔a type of excess of loss reinsurance
that applies the attachment point and reinsurance limit to the total losses arising from a
single event affecting one or more of the primary insurer's policies
✔✔aggregate excess of loss reinsurance - ✔✔a type of excess of loss reinsurance that
covers aggregated losses that exceed the attachment point, states as a monetary
amount of loss or as a loss ratio, and that occur over a specified period, usually one
year
✔✔contract of adhesion - ✔✔any contract in which one party is put in a "take-it-or-
leave-it" position and must either accept the contract as written by the other party or
reject the contract entirely
✔✔vouching-in procedure - ✔✔a procedure that enables the principal and indemnitors
to respond before the surety must pay claims and before the surety seeks
indemnification
✔✔quia timet - ✔✔a court order that enables the surety to attach the principal's assets,
prevents the principal from disposing of assets, and aids recovery of loss payments
AND ANSWERS SURE A+
✔✔treaty reinsurance - ✔✔a reinsurance agreement that covers an entire class or
portfolio of loss exposures and provides that the primary insurer's individual loss
exposures that fall within the treaty are automatically reinsured
✔✔facultative reinsurance - ✔✔reinsurance of individual loss exposures in which the
primary insurer chooses which loss exposures to submit the the reinsurer, and the
reinsurer can accept or reject any loss exposures submitted
✔✔facultative certificate of reinsurance - ✔✔an agreement that defines the terms of the
facultative reinsurance coverage on a specific loss exposure
✔✔pro rate 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)
✔✔loss adjustment expense (LAE) - ✔✔the expense that an insurer incurs the
investigate, defend, and settle claims according to the terms specified in the insurance
policy
✔✔profit-sharing commision - ✔✔a ceding commission that is contingent on the
reinsurer realizing a predetermined percentage of excess profit on ceded loss
exposures
✔✔quota share reinsurance - ✔✔a type of pro rate 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
, ✔✔surplus share reinsurance - ✔✔a type of pro rate reinsurance in which the policies
covered are those whose amount of insurance exceeds a stipulated monetary amount,
or line
✔✔excess of loss reinsurance - ✔✔a type of reinsurance in which the primary insurer is
indemnified for losses that exceed a specified monetary amount
✔✔attachment point - ✔✔the monetary amount above which the reinsurer responds to
losses
✔✔working cover - ✔✔an excess of loss reinsurance agreement with a low attachment
point
✔✔per risk excess of loss reinsurance - ✔✔a type of excess of loss reinsurance that
covers property insurance and that applies separately to each loss occurring to each
risk
✔✔catastrophe excess of loss reinsurance - ✔✔a type of excess of loss reinsurance
that protect the primary insurer from an accumulation of retained losses that arise from
a single catastrophic event
✔✔per policy excess of loss reinsurance - ✔✔a type of excess of loss reinsurance that
applied the attachment point and the reinsurance limit separately to each insurance
policy issued by the primary insurer regardless of the number of losses occurring under
each policy
✔✔per occurrence excess of loss reinsurance - ✔✔a type of excess of loss reinsurance
that applies the attachment point and reinsurance limit to the total losses arising from a
single event affecting one or more of the primary insurer's policies
✔✔aggregate excess of loss reinsurance - ✔✔a type of excess of loss reinsurance that
covers aggregated losses that exceed the attachment point, states as a monetary
amount of loss or as a loss ratio, and that occur over a specified period, usually one
year
✔✔contract of adhesion - ✔✔any contract in which one party is put in a "take-it-or-
leave-it" position and must either accept the contract as written by the other party or
reject the contract entirely
✔✔vouching-in procedure - ✔✔a procedure that enables the principal and indemnitors
to respond before the surety must pay claims and before the surety seeks
indemnification
✔✔quia timet - ✔✔a court order that enables the surety to attach the principal's assets,
prevents the principal from disposing of assets, and aids recovery of loss payments
