1|Page
ARM 401 (Associate in Risk Management) 2025/2026
Exam(Questions with 100% Detailed Answers)
Global Reinsurance Company (GRC) is a European
reinsurer that accepts risks from insurers around the
world. Financial managers at GRC would like to estimate
profitability for next year for their five primary risk areas:
flood risk in Europe, earthquake risk in Japan, hurricane
risk for the Gulf Coast of the United States, California
earthquake risk, and typhoon risk in Indian Ocean nations.
The financial managers entered event probabilities, loss
payment estimates, retained loss levels, premiums to be
received, and other data into a computer. Then the
computer was programmed to select values for each
variable and based on the data, to calculate net income.
The computer was programmed to repeat the calculation
500,000 times. The output from the analysis was a
distribution showing the probability of obtaining various
profit levels. The procedure GRC used is called -
ANSWER-Computer simulation
In a normal distribution, fewer than 5% of outcomes are -
ANSWER-Outside two standard deviations above or
below the mean.
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Which oneWhich one of the following is a data analysis
technique that operates in a way similar to the human
brain? - ANSWER-neural networks
The predictive approach to data-driven decision making
would be most appropriate for which one of the following
situations? - ANSWER-A transportation company is
looking for a way to optimize routes and improve fuel
efficiency.
If an insurer wants to determine the numerical value for a
known target variable, it is most likely to use - ANSWER-
Regression
A risk manager for a grocery store wants to see if there is
a correlation between the frequency of customer slip and
fall accidents, and the time of day. Which one of the
following is a relatively simple data analysis technique that
the risk manager could use to determine this correlation? -
ANSWER-Bubble plot
A data analysis technique that an insurer would likely use
to analyze claims adjusters' notes is - ANSWER-text
mining
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Which one of the following is a characteristic that
differentiates big data from traditional data? - ANSWER-
Velocity
Which one of the following is the first step in the text
mining process? - ANSWER-Retrieve and prepare text
with preprocessing techniques
In the context of a predictive model, a true positive results
when the model - ANSWER-Correctly predicts a positive
Tania works in the fraud unit for Greatview Insurance.
There is a claimant who appears to be involved in multiple
cases of insurance fraud. Tania decides to use social
media to obtain information that may be used to develop a
profile of the claimant. Tania's use of social media is an
example of which one of the following types of data? -
ANSWER-Unstructured external
Which one of the following descriptions best applies to
Monte Carlo Simulation? - ANSWER-A computer-based
method of analyzing possible outcomes based on a
specific set of variables.
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Which one of the following statements is correct with
respect to continuous probability distributions? -
ANSWER-One way of presenting a continuous probability
distribution is to divide the distribution into a countable
number of bins.
Which one of the following statements is true regarding
event tree analysis? - ANSWER-Event tree analysis
typically provides only two options, success or failure.
In Fred's large landscaping business, he knows that there
is a point where equipment becomes unsafe and difficult to
maintain. Fred realizes that after 2,000 miles of use, his
costs for maintenance on his large mowers and sod
busters dramatically rise. Using probability analysis Fred
can better know - ANSWER-When to replace equipment.
Which one of the following describes how probabilities are
expressed? - ANSWER-Numerically, as a fraction, a
percentage, or a decimal
Determining earnings-at-risk (EaR) entails modeling the
influence of factors such as - ANSWER-Changes in the
prices of products and production costs on an
organization's earnings.
ARM 401 (Associate in Risk Management) 2025/2026
Exam(Questions with 100% Detailed Answers)
Global Reinsurance Company (GRC) is a European
reinsurer that accepts risks from insurers around the
world. Financial managers at GRC would like to estimate
profitability for next year for their five primary risk areas:
flood risk in Europe, earthquake risk in Japan, hurricane
risk for the Gulf Coast of the United States, California
earthquake risk, and typhoon risk in Indian Ocean nations.
The financial managers entered event probabilities, loss
payment estimates, retained loss levels, premiums to be
received, and other data into a computer. Then the
computer was programmed to select values for each
variable and based on the data, to calculate net income.
The computer was programmed to repeat the calculation
500,000 times. The output from the analysis was a
distribution showing the probability of obtaining various
profit levels. The procedure GRC used is called -
ANSWER-Computer simulation
In a normal distribution, fewer than 5% of outcomes are -
ANSWER-Outside two standard deviations above or
below the mean.
,2|Page
Which oneWhich one of the following is a data analysis
technique that operates in a way similar to the human
brain? - ANSWER-neural networks
The predictive approach to data-driven decision making
would be most appropriate for which one of the following
situations? - ANSWER-A transportation company is
looking for a way to optimize routes and improve fuel
efficiency.
If an insurer wants to determine the numerical value for a
known target variable, it is most likely to use - ANSWER-
Regression
A risk manager for a grocery store wants to see if there is
a correlation between the frequency of customer slip and
fall accidents, and the time of day. Which one of the
following is a relatively simple data analysis technique that
the risk manager could use to determine this correlation? -
ANSWER-Bubble plot
A data analysis technique that an insurer would likely use
to analyze claims adjusters' notes is - ANSWER-text
mining
,3|Page
Which one of the following is a characteristic that
differentiates big data from traditional data? - ANSWER-
Velocity
Which one of the following is the first step in the text
mining process? - ANSWER-Retrieve and prepare text
with preprocessing techniques
In the context of a predictive model, a true positive results
when the model - ANSWER-Correctly predicts a positive
Tania works in the fraud unit for Greatview Insurance.
There is a claimant who appears to be involved in multiple
cases of insurance fraud. Tania decides to use social
media to obtain information that may be used to develop a
profile of the claimant. Tania's use of social media is an
example of which one of the following types of data? -
ANSWER-Unstructured external
Which one of the following descriptions best applies to
Monte Carlo Simulation? - ANSWER-A computer-based
method of analyzing possible outcomes based on a
specific set of variables.
, 4|Page
Which one of the following statements is correct with
respect to continuous probability distributions? -
ANSWER-One way of presenting a continuous probability
distribution is to divide the distribution into a countable
number of bins.
Which one of the following statements is true regarding
event tree analysis? - ANSWER-Event tree analysis
typically provides only two options, success or failure.
In Fred's large landscaping business, he knows that there
is a point where equipment becomes unsafe and difficult to
maintain. Fred realizes that after 2,000 miles of use, his
costs for maintenance on his large mowers and sod
busters dramatically rise. Using probability analysis Fred
can better know - ANSWER-When to replace equipment.
Which one of the following describes how probabilities are
expressed? - ANSWER-Numerically, as a fraction, a
percentage, or a decimal
Determining earnings-at-risk (EaR) entails modeling the
influence of factors such as - ANSWER-Changes in the
prices of products and production costs on an
organization's earnings.
