RMIN 4000 PRACTICE 2026 EVALS QUESTIONS AND
ANSWERS SURE A+
✔✔Two types of Proportional (Pro Rata) Reinsurance agreements - ✔✔Quota and
surplus share
✔✔Quota share - ✔✔The ceding company and the reinsurer share premiums and
losses based on a fixed % (Example: Ceding Company and Insurer both take 60%
retention, proportional)
✔✔Surplus Share - ✔✔The reinsurer agrees to accept insurance in excess of the
ceding insurer's retention limit. Losses and premium are shared in the same proportion
that each party shares in the individual risk. Proportion is determined by dividing the
retention by the individual risk size!
✔✔Non-proportional (Excess of Loss) - ✔✔The reinsurer only pays when covered
losses exceed a predetermined dollar amount (used mainly for catastrophic loss)
✔✔reinsurance pool - ✔✔Organization of insurers that underwrite on a joint basis
(usually used on specialty types of coverage)
✔✔insurance investments - ✔✔Insurance premiums are invested for the time period
between the receipt of the premium and the payment of a claim. Extremely important in
lowering the cost of insurance to policyowners and offsetting unfavorable underwriting
experience
✔✔what types of investments are made with premiums? - ✔✔typically invested in "safe"
investments like bonds. life insurance can be invested in long term assets like real
estate. P&C is short term exposure so premiums are invested in securities like high
quality bonds or stocks
✔✔what are some other insurance company operations? - ✔✔information systems,
accounting, legal department, and loss control services
✔✔Juliana Duvall - ✔✔insurer-surplus lines broker-broker, social inflation,
✔✔what are the components of gross rate? - ✔✔prospective loss costs (pure premium),
expense provision (load), and margin for profit and contingencies
✔✔prospective loss costs (pure premium) - ✔✔Amount needed to pay future claims and
loss adjustments
✔✔expense provision (load) - ✔✔Amount needed to pay expenses (acquisition costs,
overhead, premium taxes)
, ✔✔Margin for Profit and Contingencies - ✔✔Amount needed to protect against the
possibility that actual claims and expenses exceed projections
✔✔Loss adjustment expense (LAE) - ✔✔Expenses associated with adjusting claims
✔✔Exposure Units - ✔✔Unit of measurement used in pricing (cars-years)
✔✔Gross Premium - ✔✔Gross Rate multiplied by number of exposure units (GR *
#exposure units)
✔✔What are the P&C ranking methods? - ✔✔Class (Manual) rating, merit rating, and
judgement method
✔✔Class (manual) Rating - ✔✔pure premium method and loss ratio method
✔✔Pure premium method - ✔✔Rates developed based on past experience.
Formula=(Incurred loss + LAE) / # exposure units
✔✔Loss Ratio Method - ✔✔Modifies the existing rates by comparing the actual cost
ratio to the expected loss ratio. Loss ratio = (incurred loss + LAE) / earned premium
✔✔merit rating - ✔✔Rates are adjusted upward or downward based on experience, 3
Types: Schedule, Experience, and Retrospective
✔✔judgement method - ✔✔Rates are determined by the judgement of the underwriter
(When data is limited)
✔✔what are the largest reinsurance brokers? - ✔✔Aon, Marsh / Guy Carpenter, and
Willis
✔✔balance sheet assets - ✔✔Mostly financial investments vs. real property (buildings
or factories) & production equipment
✔✔balance sheet liabilities - ✔✔loss reserves (open claims, incurred but not reported
losses, etc.) and unearned premiums (paid in advance but premium hasn't been earned
yet
✔✔policyholders' surplus - ✔✔Total assets - total liabilities
✔✔income statement revenues - ✔✔premiums and investment income
✔✔income statement expenses - ✔✔claims and claim adjusting expenses,
underwriting, selling/general/admin. expenses, and taxes
ANSWERS SURE A+
✔✔Two types of Proportional (Pro Rata) Reinsurance agreements - ✔✔Quota and
surplus share
✔✔Quota share - ✔✔The ceding company and the reinsurer share premiums and
losses based on a fixed % (Example: Ceding Company and Insurer both take 60%
retention, proportional)
✔✔Surplus Share - ✔✔The reinsurer agrees to accept insurance in excess of the
ceding insurer's retention limit. Losses and premium are shared in the same proportion
that each party shares in the individual risk. Proportion is determined by dividing the
retention by the individual risk size!
✔✔Non-proportional (Excess of Loss) - ✔✔The reinsurer only pays when covered
losses exceed a predetermined dollar amount (used mainly for catastrophic loss)
✔✔reinsurance pool - ✔✔Organization of insurers that underwrite on a joint basis
(usually used on specialty types of coverage)
✔✔insurance investments - ✔✔Insurance premiums are invested for the time period
between the receipt of the premium and the payment of a claim. Extremely important in
lowering the cost of insurance to policyowners and offsetting unfavorable underwriting
experience
✔✔what types of investments are made with premiums? - ✔✔typically invested in "safe"
investments like bonds. life insurance can be invested in long term assets like real
estate. P&C is short term exposure so premiums are invested in securities like high
quality bonds or stocks
✔✔what are some other insurance company operations? - ✔✔information systems,
accounting, legal department, and loss control services
✔✔Juliana Duvall - ✔✔insurer-surplus lines broker-broker, social inflation,
✔✔what are the components of gross rate? - ✔✔prospective loss costs (pure premium),
expense provision (load), and margin for profit and contingencies
✔✔prospective loss costs (pure premium) - ✔✔Amount needed to pay future claims and
loss adjustments
✔✔expense provision (load) - ✔✔Amount needed to pay expenses (acquisition costs,
overhead, premium taxes)
, ✔✔Margin for Profit and Contingencies - ✔✔Amount needed to protect against the
possibility that actual claims and expenses exceed projections
✔✔Loss adjustment expense (LAE) - ✔✔Expenses associated with adjusting claims
✔✔Exposure Units - ✔✔Unit of measurement used in pricing (cars-years)
✔✔Gross Premium - ✔✔Gross Rate multiplied by number of exposure units (GR *
#exposure units)
✔✔What are the P&C ranking methods? - ✔✔Class (Manual) rating, merit rating, and
judgement method
✔✔Class (manual) Rating - ✔✔pure premium method and loss ratio method
✔✔Pure premium method - ✔✔Rates developed based on past experience.
Formula=(Incurred loss + LAE) / # exposure units
✔✔Loss Ratio Method - ✔✔Modifies the existing rates by comparing the actual cost
ratio to the expected loss ratio. Loss ratio = (incurred loss + LAE) / earned premium
✔✔merit rating - ✔✔Rates are adjusted upward or downward based on experience, 3
Types: Schedule, Experience, and Retrospective
✔✔judgement method - ✔✔Rates are determined by the judgement of the underwriter
(When data is limited)
✔✔what are the largest reinsurance brokers? - ✔✔Aon, Marsh / Guy Carpenter, and
Willis
✔✔balance sheet assets - ✔✔Mostly financial investments vs. real property (buildings
or factories) & production equipment
✔✔balance sheet liabilities - ✔✔loss reserves (open claims, incurred but not reported
losses, etc.) and unearned premiums (paid in advance but premium hasn't been earned
yet
✔✔policyholders' surplus - ✔✔Total assets - total liabilities
✔✔income statement revenues - ✔✔premiums and investment income
✔✔income statement expenses - ✔✔claims and claim adjusting expenses,
underwriting, selling/general/admin. expenses, and taxes
