RMI211 Practice Exam 3 Questions With
Correct Answers
The major reasons for insurer insolvency include which of the following:
I. Inadequate pricing and loss reserves
II. Rapid Growth and inadequate surplus
A. I only
B. II only
C. both I and II
D. Neither I norII - answer✔✔C
Which of the following is a principal method of insuring the solvency of insurers?
A. requiring submission of annual financial statements to state regulators
B. tracking and investing market conduct complaints against insurers
C. disciplining agents of the insurer for illegal sale practices
D. regulating the forms (applications and policies) employed by the insurer - answer✔✔A
The number of title insurance companies operating in State Z is relatively low. Recently, the
largest of these companies (50% market share) acquired the second largest company (30%
market share). Immediately after the acquisition, the insurer raised premiums by 75%. This
scenario demonstrates which of the following rationales for the regulation of insurance?
A. maintain insurers solvency
B. prohibit unfair sales practice by agents
C. ensure reasonable rates
In which of the following did the Court decide insurance was interstate commerce when
conducted across state lines, and therefore was subject to federal regulation?
A. Paul v. Virginia
B. South-Eastern Underwriters Association case
C. McCarran-Ferguson Act
D. Financial Modernization Act - answer✔✔B
A life insurance company based in Canada was licensed to operate in Massachusetts. When
operating in Massachusetts, the Canadian insurer is considered to be (a)
A. domestic insurer
B. captive insurer
C. foreign insurer
D. alien insurer - answer✔✔D
XYZ Mutual Insurance Company has total assets of $10 million. The policyholders' surplus is $2
million. What are XYZ Mutual's total liabilities?
A. $4 million
B. $8 million
C. $10 million
D. $ 12 million - answer✔✔B
Mutual Property Insurance Company has a surplus of $2 million. According to a conservative
rule, how much in new net premiums can Mutual Property Insurance Company safely write?
A. $2 million
B. $8 million
C. $10 million
D. $20 million - answer✔✔A
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