Portfolio Reinsurance

### What is the primary purpose of portfolio reinsurance? - [ ] To replace the primary insurer - [x] To transfer a portion of risk to a reinsurer - [ ] To calculate premiums - [ ] To increase policyholder rates > **Explanation:** The primary purpose of portfolio reinsurance is to transfer a portion of the risk from the primary insurer to the reinsurer to help mitigate exposure and stabilize financial conditions. ### Who typically benefits from portfolio reinsurance? - [ ] Only reinsurers - [x] Both primary insurers and reinsurers - [ ] Only policyholders - [ ] Government entities > **Explanation:** Both primary insurers and reinsurers benefit from portfolio reinsurance. Insurers manage their risk better, while reinsurers diversify their risk portfolios and earn premiums. ### What type of reinsurance covers only losses exceeding a certain amount? - [ ] Proportional Reinsurance - [x] Non-Proportional Reinsurance - [ ] Facultative Reinsurance - [ ] Treaty Reinsurance > **Explanation:** Non-proportional reinsurance covers losses that exceed a certain threshold or amount, helping insurers manage extreme risk scenarios. ### A ceding company is: - [x] The primary insurer transferring risk - [ ] The reinsurer accepting risk - [ ] The insurance broker - [ ] The policyholder > **Explanation:** A ceding company is the primary insurer that transfers a portion of its risk to a reinsurer under a reinsurance agreement. ### What does retention refer to in a reinsurance agreement? - [ ] The reinsurance premium - [ ] The policyholder's deductible - [x] The amount of risk retained by the ceding company - [ ] The total value of ceded policies > **Explanation:** Retention refers to the amount of risk or exposure that the ceding company retains and does not transfer to the reinsurer. ### Which type of reinsurance agreement covers a pre-defined portfolio of policies? - [ ] Facultative Reinsurance - [ ] Non-Proportional Reinsurance - [ ] Proportional Reinsurance - [x] Treaty Reinsurance > **Explanation:** Treaty reinsurance covers a pre-defined portfolio of policies as per an agreement between the primary insurer and the reinsurer. ### In proportional reinsurance, how are premiums and losses shared? - [ ] They are not shared. - [ ] Only the premiums are shared. - [x] Both premiums and losses are shared proportionally. - [ ] Only the losses are shared. > **Explanation:** In proportional reinsurance, both premiums and losses are shared proportionally between the primary insurer and the reinsurer based on the agreed percentage. ### What is a common feature of facultative reinsurance? - [ ] Covers all policies in a portfolio - [x] Applies to individual and specific risks - [ ] Automatically renewable - [ ] Includes only property insurance > **Explanation:** Facultative reinsurance is characterized by its application to individual and specific risks, rather than an entire portfolio of policies. ### What entity typically assumes a percentage of the risks in portfolio reinsurance? - [ ] The policyholder - [ ] The ceding company alone - [x] The reinsurer - [ ] Regulatory bodies > **Explanation:** In portfolio reinsurance, the reinsurer assumes a percentage of the risks and liabilities from the ceding company. ### Which of the following describes the diversification of a reinsurer's risk portfolio? - [x] Accepting various risks from multiple insurance companies - [ ] Retaining all risks within a single jurisdiction - [ ] Issuing primary insurance policies - [ ] Only covering personal insurance policies > **Explanation:** Diversification of a reinsurer's portfolio involves accepting various types of risks from multiple insurance companies, geographical areas, and lines of business.