MICHIGAN SURPLUS LINES INSURANCE EXAM PREP RECENT
QUESTIONS AND ANSWERS
(6) Karl the fortune teller believes that the world is full of uncertainty, and so is his destiny. He often
engages himself in extreme sports activities for fun and for challenge. He thinks he will need more
insurance coverage in the future. He prefers a surplus line policy.
A) This is a good idea
B) This is probably not a good idea - CORRECT ANSWERS-B) This is probably not a good idea
Surplus lines is for hard to place risk. nothing about this is really hard to place, and he should maybe just
buy more life insurance.
(7) A domestic surplus lines company must be licensed in at least one state or other US jurisdiction.
True or False - CORRECT ANSWERS-True
(8) When a surplus lines insurance for coverage in this state is not placed through a licensed surplus lines
agent here,
A) The transaction is a foreign transaction that is still technically lawful
B) The transaction would still qualify as the lawful transaction of surplus lines insurance
C) The transaction would not qualify as the lawful transaction of surplus lines insurance - CORRECT
ANSWERS-C) The transaction would not qualify as the lawful transaction of surplus lines insurance
(9) The Terrorism Risk Insurance Act (TRIA):
A) Applies to surplus lines policies
B) Does not apply to surplus lines policies - CORRECT ANSWERS-A) Applies to surplus lines
policies.
,(10) A surplus lines policy:
A) Is still covered by the state guaranty fund when placed locally
B) Is covered by the state guaranty fund as long as it is placed via a licensed broker or agent.
C) Is not covered by the state guaranty fund - CORRECT ANSWERS-C) Is not covered by the
state guaranty fund
(11) For surplus lines insurers, the relative freedom from form and rate regulation give:
A)Flexibility
B) Legal Waiver
C) Cost Advantage
D) The right of non-disclosure - CORRECT ANSWERS-A) Flexibility
(15) In Michigan, a surplus lines producer must report surplus lines or non admitted insurance business
written for a Michigan risk on what basis?
A) Monthly
B) Quarterly
C) Semi-Annually
D) Annually - CORRECT ANSWERS-C) Semi-Annually
(16) Which of these can be used to determine success between an underwriter and an agent?
A) Hit Ratio
B) Spot Ratio
C) Transfer Ratio
D) Smart Ratio
E) None of These - CORRECT ANSWERS-A) Hit Ratio
(17) In many insurance policies, losses will be reimbursed only in excess of a threshold known as:
A)A Baseline
, B) A Deductible
C) A Bottom-line
D) A trigger - CORRECT ANSWERS-B) A Deductible
(1)Surplus Lines premiums typically expand during:
A) A soft Market
B) A Hard Market - CORRECT ANSWERS-A Hard Market.
Surplus lines premiums typically expand during a hard market.
(2) During the time of a hard market, insurers will:
A) Tighten their underwriting standards
B) Loosen their underwriting standards - CORRECT ANSWERS-A) Tighten their underwriting
standards.
Tighten and raise premiums.
(3) A Ceding company (Choose all that apply):
A) Is a primary insurer
B) Is also a reinsurer
C) Is always also a captive company
D) Passes on to other insurers some part of its risk under insurance policies it has accepted
E) Will not be held liable to pay the claims in the event of default by the reinsurer. - CORRECT
ANSWERS-A) Is primary Insurer
D) Passes on to other insurers some of its risk under insurance policies it has accepted
(4) An insurers appetite to write business is often measured by:
A) Its risk class
B) Its status
C) Its financial strength
QUESTIONS AND ANSWERS
(6) Karl the fortune teller believes that the world is full of uncertainty, and so is his destiny. He often
engages himself in extreme sports activities for fun and for challenge. He thinks he will need more
insurance coverage in the future. He prefers a surplus line policy.
A) This is a good idea
B) This is probably not a good idea - CORRECT ANSWERS-B) This is probably not a good idea
Surplus lines is for hard to place risk. nothing about this is really hard to place, and he should maybe just
buy more life insurance.
(7) A domestic surplus lines company must be licensed in at least one state or other US jurisdiction.
True or False - CORRECT ANSWERS-True
(8) When a surplus lines insurance for coverage in this state is not placed through a licensed surplus lines
agent here,
A) The transaction is a foreign transaction that is still technically lawful
B) The transaction would still qualify as the lawful transaction of surplus lines insurance
C) The transaction would not qualify as the lawful transaction of surplus lines insurance - CORRECT
ANSWERS-C) The transaction would not qualify as the lawful transaction of surplus lines insurance
(9) The Terrorism Risk Insurance Act (TRIA):
A) Applies to surplus lines policies
B) Does not apply to surplus lines policies - CORRECT ANSWERS-A) Applies to surplus lines
policies.
,(10) A surplus lines policy:
A) Is still covered by the state guaranty fund when placed locally
B) Is covered by the state guaranty fund as long as it is placed via a licensed broker or agent.
C) Is not covered by the state guaranty fund - CORRECT ANSWERS-C) Is not covered by the
state guaranty fund
(11) For surplus lines insurers, the relative freedom from form and rate regulation give:
A)Flexibility
B) Legal Waiver
C) Cost Advantage
D) The right of non-disclosure - CORRECT ANSWERS-A) Flexibility
(15) In Michigan, a surplus lines producer must report surplus lines or non admitted insurance business
written for a Michigan risk on what basis?
A) Monthly
B) Quarterly
C) Semi-Annually
D) Annually - CORRECT ANSWERS-C) Semi-Annually
(16) Which of these can be used to determine success between an underwriter and an agent?
A) Hit Ratio
B) Spot Ratio
C) Transfer Ratio
D) Smart Ratio
E) None of These - CORRECT ANSWERS-A) Hit Ratio
(17) In many insurance policies, losses will be reimbursed only in excess of a threshold known as:
A)A Baseline
, B) A Deductible
C) A Bottom-line
D) A trigger - CORRECT ANSWERS-B) A Deductible
(1)Surplus Lines premiums typically expand during:
A) A soft Market
B) A Hard Market - CORRECT ANSWERS-A Hard Market.
Surplus lines premiums typically expand during a hard market.
(2) During the time of a hard market, insurers will:
A) Tighten their underwriting standards
B) Loosen their underwriting standards - CORRECT ANSWERS-A) Tighten their underwriting
standards.
Tighten and raise premiums.
(3) A Ceding company (Choose all that apply):
A) Is a primary insurer
B) Is also a reinsurer
C) Is always also a captive company
D) Passes on to other insurers some part of its risk under insurance policies it has accepted
E) Will not be held liable to pay the claims in the event of default by the reinsurer. - CORRECT
ANSWERS-A) Is primary Insurer
D) Passes on to other insurers some of its risk under insurance policies it has accepted
(4) An insurers appetite to write business is often measured by:
A) Its risk class
B) Its status
C) Its financial strength
