1|Page
280 Recent Questions and Answers for the Michigan
Surplus Lines Exam Prep/ Michigan Surplus Lines
Insurance Test Prep
(1)Surplus Lines premiums typically expand during:
A) A soft Market
B) A Hard Market - ...✔✔ANSWER✔✔...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 -
...✔✔ANSWER✔✔...A) Tighten their underwriting
standards.
Tighten and raise premiums.
(3) A Ceding company (Choose all that apply):
A) Is a primary insurer
,2|Page
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. - ...✔✔ANSWER✔✔...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
D)Its premium to surplus ratio - ...✔✔ANSWER✔✔...D) Its
premium to surplus ratio
(5) A surplus lines insurer:
A) Has to be licensed and admitted in the same state as
the broker
,3|Page
B) Is not always licensed or admitted in the same state as
the broker - ...✔✔ANSWER✔✔...B) Is not always licensed
or admitted in the same state as the broker
(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 - ...✔✔ANSWER✔✔...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 - ...✔✔ANSWER✔✔...True
, 4|Page
(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 -
...✔✔ANSWER✔✔...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 -
...✔✔ANSWER✔✔...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.
280 Recent Questions and Answers for the Michigan
Surplus Lines Exam Prep/ Michigan Surplus Lines
Insurance Test Prep
(1)Surplus Lines premiums typically expand during:
A) A soft Market
B) A Hard Market - ...✔✔ANSWER✔✔...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 -
...✔✔ANSWER✔✔...A) Tighten their underwriting
standards.
Tighten and raise premiums.
(3) A Ceding company (Choose all that apply):
A) Is a primary insurer
,2|Page
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. - ...✔✔ANSWER✔✔...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
D)Its premium to surplus ratio - ...✔✔ANSWER✔✔...D) Its
premium to surplus ratio
(5) A surplus lines insurer:
A) Has to be licensed and admitted in the same state as
the broker
,3|Page
B) Is not always licensed or admitted in the same state as
the broker - ...✔✔ANSWER✔✔...B) Is not always licensed
or admitted in the same state as the broker
(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 - ...✔✔ANSWER✔✔...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 - ...✔✔ANSWER✔✔...True
, 4|Page
(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 -
...✔✔ANSWER✔✔...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 -
...✔✔ANSWER✔✔...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.
