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RSK3701 EXAM PACK 2023
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RSK3701 EXAM PACK 2023
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RSK 3701 EXAMPACK 2023
[School]
[Course title]
, Compiled by: Dr Vincent +254740571692
SECTION A: MULTIPLE CHOICE
1.2, 2.2, 3.2, 4.1, 5.2, 6.2, 7.4, 8.3, 9.2,10.4, 11.4, 12.1, 13.1, 14.3, 15.4, 16.4, 17.1, 18.1, 19.3, 20.4
Calculations
Question 20
Quota share
In terms of a quota share treaty, the reinsurer is bound to accept a fixed proportion of every risk. The risk is
shared on a proportional basis between the cadent and reinsurer. The share of the different parties involved in
the government is expressed as a percentage.
The reinsurer will pay 100% - 60%
=40% *80 000
=32 000
Page | 1
,Section B: false/true
1.1 False – re-insurance does not assure that the buyer of insurance will charge the same premium for the same
risk.
- The purpose of reinsurance is to spread risk and increases the financial stability of insurers.
1.2 The special condition of average applies to agricultural products, the insurer pays the full amount when
the percentage of the loss is greater than 75% and the loss should be shared between the insured and the
insurer when the percentage is less than 75% of the loss percentage of the loss calculation. Total sum/
total value *100/1 = 100 000/125 000* 100/1 =80%
False because the percentage of the loss is 80% which is greater than 75%.
The insurer would pay the full amount of the loss which is 50 000 not 40 000
1.3 False: this principle applies to policies of indemnity contribution is where the insured has more than one
policy. In force for the same risk, each insurer pays its share of risk and the insured does not profit
1.4 True: pooling makes more and reliable predictions which results in smaller deviations from expectations in
terms of possible losses.
- Pre-requisite for insurance is insurable interest
1.5 False: insurable interest must be present at the inception or at the insurance of the policy and not when a
claim is lodged
- Insurable interest is the legally relationship between the insured and the financial loss he or she
suffers.
1.6 True: it is a policy of exclusion where by anything that is not specifically excluded will be covered under all
risks insurance.
- A torn jacket will be covered under asset all risk policy as it makes provision while an individual is
away from home and the jacket was not torn due to wear or tear.
1.7 Calculation of a reduced deductible P
= (L-D) *(1+R)
P = amount payable by the insurer
L = loss
D = deductible
R = recapture factor/ interest
Step 1. Calculate P = (L-D) *(1+R)
= (50 000 – 10 000)* (1+0, 05)
=40.000*1.0,5
Page | 2
, =42.000
Step 2. Reduced deductible R= L-P R = Reduced deductible
=50.000 – 42.000 L = loss
=8000 D = deductible
True – the statement is true due to the aforementioned calculation; the deductible is reduced from
10.000 to 8000. As the size of deductible decreases, the size of the loss increases.
1.8 False: Facultative cover of 60.000 000 will have to be placed by the insurer.
Calculation: step 1 Gross retention
Net line 4000.000
+50% of loss profits and fixe 2000.000
Total net line 6000.000
9* retention 60.000 000
Step 2: calculate total sum insured
Fixe 80.000 000
Loss of profits 40.000 000
Total sum 120.000 000
Step 3: Calculate the facultative cover required
Total sum insured – gross retention
=120.000 000 – 60.000 000
=60.000 000
1.9 False: premiums paid to an accredited intermediary credit or credit agent are deemed to have been
received by the insurer, the insured is covered by the policy even through the broker fuelled to pay the
premiums
1.10 False – she will not be able to claim from personal accident policy in this case because it only
compensate the insured if he or she is injured or ladled as a direct result of accident
- Personal accident policy provides no cover for illness
- She will be able to claim for compensation in terms of occupational injuries and diseases act.
(CO1D)
Question 2
Page | 3
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