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Reinsurance Question Paper

Reinsurance

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2009

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
FIRST SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF
COMMERCE

BMS 312:
REINSURANCE

DATE: Wednesday, 30th December, 2009
TIME: 2.00 p.m. – 4.00 p.m.
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INSTRUCTIONS:
• Attempt question ONE (Compulsory) and any other TWO.
• Start each question on a new page.
• Marks are awarded for proper explanation and use of appropriate examples
QUESTION ONE:
a)
Quota share is an obligatory ceding treaty. Reinsurance without Quota Share is
like a public vehicle without passengers.
Required:

i)
Using appropriate examples discuss the specific uses of the Quota Share
facility in reinsurance practice. (10marks)

ii)
What are its advantages (5marks)

b)
Discuss the formation of a reinsurance contract along the following lines:-

i)
Placing information and disclosure (4marks)

ii)
Duration and extent of the duty of utmost good faith(4 marks)

iii)
Contractual documents and certainty (7marks)

QUESTION TWO:
a)
Rating is a key determinant of profitability in a reinsurance arrangement. As a
prospective reinsurer, what will you consider when making decision during a rating process? (12marks)

b)
What are the financial and economic implications of reinsurance? (8 marks)

QUESTION THREE:
XYZ insurance company has worked hard in the area of marketing and structuring for the
last two areas. Their efforts have started paying back and they are having a good
business experience at the time. The company’s head of risk in his report informed the
company authorities that they need Reinsurance to the risks written.
Required:
i)
Why should XYZ company give a way its hard earned business to another
company in the name of reinsurance? (10marks)
ii)
From the risk manager’s report Facultative reinsurance. Clearly explain what
you understand by facultative reinsurance. When is it appropriate to use
Facultative reinsurance?(10marks)

QUESTION FOUR:
a)
How does a reinsurance broker acquire business?(5 marks)

b)
Retention is very important in the success of a reinsurance business. Explain its
role in the business.(5marks)

c)
Discuss Facultative reinsurance and explain its disadvantages.
(10 marks)

Reinsurance Question Paper

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