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Michigan Surplus Lines Insurance Exam Prep Questions and Answers
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Michigan Surplus Lines Insurance Exam Prep Questions and Answers
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Michigan Surplus Lines Insurance ExamPrep Questions and Answers
(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
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
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
(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.
C) Is not covered by the state guaranty fund - Answer -C) Is not covered by the state
guaranty fund
(11) For surplus lines insurers, the relative freedom from form and rate regulation give:
A)Flexibility
B) Legal Waiver
C) Cost Advantage
D) The right of non-disclosure - Answer -A) Flexibility
(12) In the context of insurance, losses depend primarily on which two variables:
A) The background
B) The number of losses
C) The amount involved
D) The nature of events
E) The policy - Answer -B) The number of losses
C) The amount involved
, (13) Who must verify the financial strength and viability of a nonadmitted insurer?
A) The insurance commission
B) The department of commerce
C) The surplus line broker/agent
D) The guarantee association of the state - Answer -C) The surplus line broker/agent
(14) Which of these imposes a set of national eligibility standards for surplus lines
insurers domiciled in any US jurisdiction?
A) NRCA
B) NRTT
C) NRAS
D) NRRA - Answer -D) NRRA (National Risk Retention Association)
(15) In Michigan, a surplus lines producer must report surplus lines or non admitted
insurance business written for a Michigan risk on what basis?
A) Monthly
B) Quarterly
C) Semi-Annually
D) Annually - Answer -C) Semi-Annually
(16) Which of these can be used to determine success between an underwriter and an
agent?
A) Hit Ratio
B) Spot Ratio
C) Transfer Ratio
D) Smart Ratio
E) None of These - Answer -A) Hit Ratio
(17) In many insurance policies, losses will be reimbursed only in excess of a threshold
known as:
A)A Baseline
B) A Deductible
C) A Bottom-line
D) A trigger - Answer -B) A Deductible
(18) A benefit limit serves as:
A) A lower bond on how much the insurer will pay for the loss
B) An upper bound on how much the insurer will pay for the loss
C) A lower bound on the loss
D) AN upper bound on the loss - Answer -B) An upper bound on how much the insurer
will pay for the loss
(19) When there is inflation:
A) The claim payments will increase accordingly
B) The claim payments will decrease accordingly
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