AFSB 1 Exam with 100% Correct
Answers 2023
Bonds that are required by business entities and individuals to protect them from loss,
and for which the obligation is dictated by the contract between the principal and the
obligee and by the bond provisions, are - Correct Answer-Nonstatutory bonds
An organization that uses its collected data to calculate loss costs that member
company underwriters use to determine premiums for risks is - Correct Answer-The
Surety and Fidelity Association of America
Which of these statements regarding the principal allocation methods for reinsurance of
surety bonds is accurate? - Correct Answer-Both facultative and treaty reinsurance of
bonds can be written as pro rata or excess of loss
Suretyship and insurance are alike in that - Correct Answer-A. Insurance
commissioners regulate both.
Except in the case of a forfeiture bond, if the principal defaults, the surety will pay -
Correct Answer-B. Up to the bond penalty, but no more than the obligee's actual loss
amount.
A legal remedy that a surety can use against a defaulting bond principal, in which the
surety exercises its right to force the principal to perform by exhausting the principal's
resources instead of its own, is - Correct Answer-Exoneration
A type of reinsurance transaction that involves an agreement between the primary
insurer and the reinsurer specifying how to transfer risks, that defines the eligible risks
in terms of lines and classes of business, that specifies the parties' obligations, and for
which eligible risks are automatically reinsured, is - Correct Answer-treaty reinsurance
Suretyship shares several common elements with other forms of insurance. Which one
of these common elements is shared between suretyship and insurance? - Correct
Answer-D. Both provide protection against financial loss.
Under a cosurety agreement for which a principal defaults on the bond, how is the
cosurety's share of the risk determined and how are losses paid? - Correct Answer-A.
The cosurety agreement defines each cosurety's share of the loss that is paid by the
designated controlling cosurety, which then collects the agreed-upon portion of loss and
expense amounts from each cosurety.
The Miller Act was passed to require principals, in addition to furnishing a performance
bond, to furnish a separate payment bond guaranteeing payment of all bills incurred by
, the contractor - Correct Answer-D. For labor and materials at the project completion for
all federal jobs.
This classification of license and permit bonds guarantees that the principal will conduct
specific business activities according to the law and protect the public from
misrepresentation or fraudulent practices by the seller. Which of the following
classification of license and permit bonds is described? - Correct Answer-merchandising
and delaer bonds
Which one of these statements provides an accurate description of license and permit
bonds or their use? - Correct Answer-A. Most occupations and professions require
licenses and permits, which require license and permit bonds.
Public official bonds are written for principals who have administrative duties but do not
handle money and who - Correct Answer-D. Include commissioners, assessors, judges,
coroners, town clerks, engineers, and auditors.
One type of fiduciary bond is required of an individual who has the legal responsibility
for the care of a minor or a legally incompetent person or for such a person's property.
This bond is called - Correct Answer-guardians bond
A bond that guarantees that, if a higher court sustains an initial judgment on appeal, the
defendant will pay the entire judgment, plus court costs and interest, is - Correct
Answer-supersedeas bond
What type of miscellaneous bond do sureties often write as open penalty forms to
provide for fluctuation of the value of the subject of the bond? - Correct Answer-lost
security bond
Which one of these statements is true about lost securities bonds? - Correct Answer-A.
The security owner signs an affidavit describing the lost security and explaining how it
became lost and completes a bond application with an indemnity agreement.
Which one of these types of miscellaneous bonds guarantees that the principal will
establish and fund a trust or will provide alternative financial insurance? - Correct
Answer-hazardous waste facilities financial guarantee bonds
This classification of license and permit bonds poses the least risk to the surety and
guarantees that the principal will conform with laws that govern the business or activity it
conducts. - Correct Answer-compliance only bond
In this public official category of bonds, sureties pay losses when subordinates in the
principal's office cause them, as well as when the principal causes them. This described
category of bonds - Correct Answer-A. Is officials who handle public funds, and the
principals are charged with honesty and faithful performance of duty while handling
money as required by law.
Answers 2023
Bonds that are required by business entities and individuals to protect them from loss,
and for which the obligation is dictated by the contract between the principal and the
obligee and by the bond provisions, are - Correct Answer-Nonstatutory bonds
An organization that uses its collected data to calculate loss costs that member
company underwriters use to determine premiums for risks is - Correct Answer-The
Surety and Fidelity Association of America
Which of these statements regarding the principal allocation methods for reinsurance of
surety bonds is accurate? - Correct Answer-Both facultative and treaty reinsurance of
bonds can be written as pro rata or excess of loss
Suretyship and insurance are alike in that - Correct Answer-A. Insurance
commissioners regulate both.
Except in the case of a forfeiture bond, if the principal defaults, the surety will pay -
Correct Answer-B. Up to the bond penalty, but no more than the obligee's actual loss
amount.
A legal remedy that a surety can use against a defaulting bond principal, in which the
surety exercises its right to force the principal to perform by exhausting the principal's
resources instead of its own, is - Correct Answer-Exoneration
A type of reinsurance transaction that involves an agreement between the primary
insurer and the reinsurer specifying how to transfer risks, that defines the eligible risks
in terms of lines and classes of business, that specifies the parties' obligations, and for
which eligible risks are automatically reinsured, is - Correct Answer-treaty reinsurance
Suretyship shares several common elements with other forms of insurance. Which one
of these common elements is shared between suretyship and insurance? - Correct
Answer-D. Both provide protection against financial loss.
Under a cosurety agreement for which a principal defaults on the bond, how is the
cosurety's share of the risk determined and how are losses paid? - Correct Answer-A.
The cosurety agreement defines each cosurety's share of the loss that is paid by the
designated controlling cosurety, which then collects the agreed-upon portion of loss and
expense amounts from each cosurety.
The Miller Act was passed to require principals, in addition to furnishing a performance
bond, to furnish a separate payment bond guaranteeing payment of all bills incurred by
, the contractor - Correct Answer-D. For labor and materials at the project completion for
all federal jobs.
This classification of license and permit bonds guarantees that the principal will conduct
specific business activities according to the law and protect the public from
misrepresentation or fraudulent practices by the seller. Which of the following
classification of license and permit bonds is described? - Correct Answer-merchandising
and delaer bonds
Which one of these statements provides an accurate description of license and permit
bonds or their use? - Correct Answer-A. Most occupations and professions require
licenses and permits, which require license and permit bonds.
Public official bonds are written for principals who have administrative duties but do not
handle money and who - Correct Answer-D. Include commissioners, assessors, judges,
coroners, town clerks, engineers, and auditors.
One type of fiduciary bond is required of an individual who has the legal responsibility
for the care of a minor or a legally incompetent person or for such a person's property.
This bond is called - Correct Answer-guardians bond
A bond that guarantees that, if a higher court sustains an initial judgment on appeal, the
defendant will pay the entire judgment, plus court costs and interest, is - Correct
Answer-supersedeas bond
What type of miscellaneous bond do sureties often write as open penalty forms to
provide for fluctuation of the value of the subject of the bond? - Correct Answer-lost
security bond
Which one of these statements is true about lost securities bonds? - Correct Answer-A.
The security owner signs an affidavit describing the lost security and explaining how it
became lost and completes a bond application with an indemnity agreement.
Which one of these types of miscellaneous bonds guarantees that the principal will
establish and fund a trust or will provide alternative financial insurance? - Correct
Answer-hazardous waste facilities financial guarantee bonds
This classification of license and permit bonds poses the least risk to the surety and
guarantees that the principal will conform with laws that govern the business or activity it
conducts. - Correct Answer-compliance only bond
In this public official category of bonds, sureties pay losses when subordinates in the
principal's office cause them, as well as when the principal causes them. This described
category of bonds - Correct Answer-A. Is officials who handle public funds, and the
principals are charged with honesty and faithful performance of duty while handling
money as required by law.
