RSK3701 STUDY PACK 2021

SECTION A: MULTIPLE CHOICE 1.2, 2.2, 3.2, 4.1, 5.2, 6.2, 7.4, 8.3, 9.2,10.4, 11.4, 12.1, 13.1, 14.3, 15.4, 16.4, 17.1, 18.1, 19.3, 20.4 RSK3701 STUDY PACK 2021. Page | 1 Calculations Question 20 Quota share In terms of a quota share treaty, the reinsurer is bound to accept a fixed proportion of every risk. The risk is shared on a proportional basis between the cadent and reinsurer. The share of the different parties involved in the government is expressed as a percentage. The reinsurer will pay 100% - 60% =40% *80 000 =32 000 Section B: false/true 1.1 False – re-insurance does not assure that the buyer of insurance will charge the same premium for the same risk. - The purpose of reinsurance is to spread risk and increases the financial stability of insurers. 1.2 The special condition of average applies to agricultural products, the insurer pays the full amount when the percentage of the loss is greater than 75% and the loss should be shared between the insured and the insurer when the percentage is less than 75% of the loss percentage of the loss calculation. Total sum/ total value *100/1 = 100 000/125 000* 100/1 =80%  False because the percentage of the loss is 80% which is greater than 75%.  The insurer would pay the full amount of the loss which is 50 000 not 40 000 1.3 False: this principle applies to policies of indemnity contribution is where the insured has more than one policy. In force for the same risk, each insurer pays its share of risk and the insured does not profit 1.4 True: pooling makes more and reliable predictions which results in smaller deviations from expectations in terms of possible losses. - Pre-requisite for insurance is insurable interest 1.5 False: insurable interest must be present at the inception or at the insurance of the policy and not when a claim is lodged - Insurable interest is the legally relationship between the insured and the financial loss he or she suffers. 1.6 True: it is a policy of exclusion where by anything that is not specifically excluded will be covered under all risks insurance