An insurer's ability to absorb higher than expected losses, or a catastrophe event, is
largely dependent on its
• Surplus.
• Written premium.
• Dividends.
• Loss reserves.
The claims representatives at Goshen Insurance use various methods to establish and
review case reserves. Which one of the following methods of establishing case reserves
involves a consensus among multiple claims representatives?
• Expert system method
• Formula method
• Roundtable method
• Average value method
Adjustments to loss reserves and loss adjustment expense (LAE) reserves have
implications for an insurer's capital. Adjustments that reduce loss reserves will
• Reduce net income and increase policyholders' surplus.
• Increase both net income and policyholders' surplus.
• Increase net income and reduce policyholders' surplus.
• Reduce both net income and policyholders' surplus.
Policyholders' surplus is an insurer's net worth, and equals assets minus liabilities
The ability of an insurer's management team and the diversification of its business mix
are evaluated when A.M. Best is reviewing which one of the following key rating factors
of an insurer?
• Enterprise risk management
• Rating lift/drag
• Operating performance
• Business profile
State insurance departments monitor the treatment of insureds, applicants for
insurance, and claimants by four operational areas of an insurer. Discriminating unfairly
when selecting loss exposures would be considered an unfair practice by which one of
the following?
• Claims
• Ratemaking
• Sales and advertising
• Underwriting
, Capital budgeting manages a corporation's
• Insurance purchases.
• Cash inflows.
• Long-term investments.
• Accounts receivable.
An insurer with a combined ratio of 90 is earning how many cents of underwriting profit
on every premium dollar? 10
An investment has an initial cash outflow of $30,000 and a return of $0 at the end of the
first year and $40,000 at the end of the second year. The required rate of return is 12%.
What is the net present value of this investment? Disregard the effect of depreciation
and taxes.
• $1,888
• $5,716
• $20,176
• $37,604
Fernanda is a claims adjuster for an insurer who utilizes recent advances in data
collection. As part of her claim’s investigation, she is using data collected by devices
and transmitted automatically and wirelessly to the insurer. Fernanda is using
• Internet of Things devices.
• Artificial Intelligence.
• Scrapings from the Web.
• Government databases.
Moon Company’s computer system must be replaced in five years at a cost of $80,000.
The owners have placed $60,000 in an investment that pays 4 percent compounded
semi-annually and matures in five years. When this investment matures, how much
additional money, if any, will Moon Company need to replace the computer system?
• $0
• $ 6,860
• $ 6,998
• $ 8,000
Under the principal of generally accepted accounting principles (GAAP),
• A Transactions must be recorded at their purchase price.
• B Transaction records must reflect any premium or discount.
• C Transactions must be recorded at their fair market value.
• D Trans must be recorded consistently, either at acq cost or fair market value.
largely dependent on its
• Surplus.
• Written premium.
• Dividends.
• Loss reserves.
The claims representatives at Goshen Insurance use various methods to establish and
review case reserves. Which one of the following methods of establishing case reserves
involves a consensus among multiple claims representatives?
• Expert system method
• Formula method
• Roundtable method
• Average value method
Adjustments to loss reserves and loss adjustment expense (LAE) reserves have
implications for an insurer's capital. Adjustments that reduce loss reserves will
• Reduce net income and increase policyholders' surplus.
• Increase both net income and policyholders' surplus.
• Increase net income and reduce policyholders' surplus.
• Reduce both net income and policyholders' surplus.
Policyholders' surplus is an insurer's net worth, and equals assets minus liabilities
The ability of an insurer's management team and the diversification of its business mix
are evaluated when A.M. Best is reviewing which one of the following key rating factors
of an insurer?
• Enterprise risk management
• Rating lift/drag
• Operating performance
• Business profile
State insurance departments monitor the treatment of insureds, applicants for
insurance, and claimants by four operational areas of an insurer. Discriminating unfairly
when selecting loss exposures would be considered an unfair practice by which one of
the following?
• Claims
• Ratemaking
• Sales and advertising
• Underwriting
, Capital budgeting manages a corporation's
• Insurance purchases.
• Cash inflows.
• Long-term investments.
• Accounts receivable.
An insurer with a combined ratio of 90 is earning how many cents of underwriting profit
on every premium dollar? 10
An investment has an initial cash outflow of $30,000 and a return of $0 at the end of the
first year and $40,000 at the end of the second year. The required rate of return is 12%.
What is the net present value of this investment? Disregard the effect of depreciation
and taxes.
• $1,888
• $5,716
• $20,176
• $37,604
Fernanda is a claims adjuster for an insurer who utilizes recent advances in data
collection. As part of her claim’s investigation, she is using data collected by devices
and transmitted automatically and wirelessly to the insurer. Fernanda is using
• Internet of Things devices.
• Artificial Intelligence.
• Scrapings from the Web.
• Government databases.
Moon Company’s computer system must be replaced in five years at a cost of $80,000.
The owners have placed $60,000 in an investment that pays 4 percent compounded
semi-annually and matures in five years. When this investment matures, how much
additional money, if any, will Moon Company need to replace the computer system?
• $0
• $ 6,860
• $ 6,998
• $ 8,000
Under the principal of generally accepted accounting principles (GAAP),
• A Transactions must be recorded at their purchase price.
• B Transaction records must reflect any premium or discount.
• C Transactions must be recorded at their fair market value.
• D Trans must be recorded consistently, either at acq cost or fair market value.
