AFSB 151 Practice Exam Questions & Answers Already Passed!!

AFSB 151 Practice Exam Questions & Answers Already Passed!! 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 Treaty reinsurance A surety's liability for a surety bond can only cease to exist when the underlying obligation/agreement has been performed as specified in the contract or when the bond has been canceled An organization that uses its collected data to calculate loss costs that member company underwriters use to determine premiums for risks is The SFAA If the bond applicant is a business entity, from what parties do corporate sureties routinely require indemnity agreements? any persons who have major financial interests in the entity he surety bond three-party relationship, the party who guarantees fulfillment of the obligation and who will either perform the obligation or pay the costs for its fulfillment is the? READ the question fully surety Suretyship and insurance are alike in that Insurance commissioners regulate both. When evaluating a surety claim, claims representatives are often assisted by outside legal counsel. What other professionals assist claims representatives? engineers Following the Civil War, the growing number and complexity of financial/commercial relationships led to the need for commercial suretyship Designated depositories are banks approved by A government entity and in which the official or employee should deposit public funds Which one of these statements is true regarding financial guaranty bonds? When in place, the entire issue of these bonds would have a higher investment grade, allowing municipalities to sell their bonds at a lower interest rate. 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? A lost security bond The legally mandated hazardous waste facilities performance bond Can be posted only for hazardous waste facilities with permits, and it requires an underwriting review of the closure plan. A person who commences an action against another to obtain an equitable remedy may be required to post a bond before the court will proceed with the action. This bond is called a plaintiff bond 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 A guardians 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 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 Under a public official bond guaranteeing the honesty of a treasurer He or she must account for the cash that he or she holds while in office. Public official bonds for officials who handle public funds Guarantee losses that occur when the principal fails to follow designated depository guidelines. 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 Nonstatutory bonds Which one of the these groups, for the most part, serves the market for fidelity and surety bonds in the United States? Multiline property-casualty insurers Which one of the following developed in the United States to guarantee the large amounts of money involved in the country's industrial and commercial growth? corporate suretyship Which one of these is an accurate comparison of suretyship and banking? Both suretyship and banking are financial relationships and deal with losses that are generally defined in monetary terms; however, a surety guarantees more than just an extension of credit. A surety that is not satisfied with the principal's financial capacity, past experience, and resources other than money will probably Provide the bond subject to additional considerations and bond requirements A surety choosing to write a risky bond typically insists that the principal post adequate collateral in the form of A liquid asset, such as a certificate of deposit, or cash. A type of reinsurance in which the reinsurer evaluates the submission and can accept or reject it, and which is often called "nonobligatory reinsurance," is Facultative reinsurance. Which one of the following is an example of a third-party beneficiary on a given bond? An heir on a fiduciary executor bond In an unlimited cosurety arrangement, the obligee can collect The full loss from any of the cosureties up to the penal sum of the bond. Line underwriting activities generally include which one of the following? Selecting insureds Large accounts should be monitored to ensure that when companies add subsidiaries or affiliates or are acquired by new owners, the new parties sign a new indemnity agreement. Otherwise, if a claim arises, the surety might have only which one of the following to fall back on? Its common-law rights Line underwriting activities generally include which one of the following? Providing service to producers and policyholders In the protective phase of the bond underwriting decision, indemnity is waived only for what type of bonds? The smallest and least hazardous bonds What is the name of the agreement in which the company owner agrees not to withdraw funds the company owes the owner while the bond is in force? A subordination agreement What bond terms deal with an extended period of time after cancelation during which claims can be made? Terms discussing the bond's tail An indemnity agreement does what to a surety's rights arising from common law? Extends them Financial reports are important in bond underwriting not only because they reveal an applicant's financial condition, but also because they reflect what about the applicant? Overall management ability An example of a common addendum that might address a principal's concern about the conditions of a general agreement of indemnity (GAI) is Spousal exemption. As a loss control practice concerning large public official bonds, what may a surety ask for to confirm that the governmental body has established an approved list of banks? Designation of depository What is the only entity or individual that can make a claim against a public official bond? The government body that requires the bond What type of bond would make a surety liable for the difference between what should have been collected and the amount that can be accounted for, even though a public official might not have been dishonest? Faithful performance bond. Courts often order attachment bonds to secure property when who is within the court's jurisdiction? A nonresident defendant Sureties underwrite both attachment and replevin bonds similarly, but they usually write replevin bonds More quickly and for smaller amounts. Why are fiduciary bonds generally considered to be short-term obligations? Because most estates can be handled within several months or, at most, within a year or two. Compliance-only or privilege bond penalties are usually Nominal. Compliance bonds with third-party liability allow a direct right of action against which party for damages a third party may suffer because of the principal's acts? Surety Forfeiture bonds require the surety to pay what percentage of the bond penalty if the principal fails to complete an obligation? 100 As a fidelity loss control measure, all employees should take an annual vacation of at least how many consecutive days? Five For a new firm that is not profitable, at the very least, the bond underwriter should verify which of the following? That the firm's founders have meaningful, sufficient experience in related work line underwriters Instead of holding a principal's assets as security, a surety might choose to hold an instrument issued by a commercial bank for the principal, but with the surety named as the beneficiary. What is this instrument? an irrevocable standby letter of credit Except in the case of a forfeiture bond, if the principal defaults, the surety will pay up to the bond penalty amount, but no more than the obligees actual loss amount Which one of the following in a bond applicant's personal and employment history provides the surety underwriter with evidence of good character? Trade and payment record When assessing a contractor's capacity in terms of management control, what is the first step in the construction process? Estimating The bond underwriter must underwrite the contract, which includes determining whether it allows for a shutdown because of what type of unfavorable conditions? Weather 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 For labor and materials at the project completion for all federal jobs. Which one of these statements provides an accurate description of license and permit bonds or their use? Licenses help regulate license holders through statutes, regulations, or ordinances, and they are backed by license and permit bonds. Public official bonds are written for principals who have administrative duties but do not handle money and who Include commissioners, assessors, judges, coroners, town clerks, engineers, and auditors. Bonds in the category of public official bonds for officials whose duties require direct involvement with members of the public