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One function performed by surplus lines intermediaries that is not performed by retail agents is

Select one:

A. Filing diligent search affidavits.

B. Maintaining documentation.

C. Selling.

D. Prospecting.

Question 13

Generally an owner-operated, small to medium-sized organization, which one of the following types of intermediary develops strong relationships with local retail producers and operate within their state of domicile?

Select one:

A. Underwriting managers

B. Independent wholesale brokers

C. Managing general agents

D. National wholesalers

Question 14

When presenting the quotes, the intermediary should be sure to

Select one:

A. Describe the underwriting cycle and the current market conditions to the customer.

B. Emphasize that reinsurance is likely to apply to any losses.

C. Explain that surplus lines taxes are payable on the premium.

D. File any affidavits that might be required.

Regulation affects the type of business a surplus lines insurer writes because

Select one:

A. Regulations sometimes prohibit reinsurers from providing reinsurance for surplus lines insurers.

B. States heavily regulate the financial condition of eligible surplus lines insurers.

C. Some states mandate that certain classes of business be written by admitted insurers.

D. The insurer's financial rating may prohibit writing certain classes of business.

Before accepting a submission, a surplus lines underwriter insists that the risk provide sensitivity training for all employees and implement a monitoring system to observe employee-customer interactions. This is an example of modifying the

Select one:

A. Policy provisions, deductibles, and limits.

B. Loss exposure through risk control.

C. Policy premium.

D. Insurer's retention through facultative reinsurance.

Question 17

One way in which core operations for a surplus lines insurer differ from those of an admitted insurer is that

Select one:

A. Surplus lines underwriters need highly specialized expertise in the target market niche.

B. Their focused differentiation strategy allows surplus lines insurers to diversify their market segments more easily.

C. Surplus lines insurers rarely need specialized claims handling expertise.

D. Relationships with intermediaries with binding authority can be more loosely formed and managed.

Question 18

One way in which financial resources affect a surplus lines insurer's decisions about what products to offer is that

Select one:

A. Higher premiums during a hard market contribute to greater competition.

B. Some products have higher tax rates as a percentage of premiums written.

C. Insurers must maintain an acceptable premium-to-surplus ratio for each class of business.

D. Products offered in some states have more favorable regulatory environments for taxation and reinsurance.

Question 19

The solvency of surplus lines insurers is

Select one:

A. Considered by rating organizations to be significantly worse than the solvency of admitted insurers.

B. Rated by guarantee funds to ensure that sufficient funds are available to pay claims.

C. Unregulated and unmonitored in the state of domicile and any other state.

D. Evaluated by credit rating organizations such as A.M. Best Company.

Question 20

A surplus lines underwriter will most likely transfer a portion of the loss liability to a facultative reinsurer when

Select one:

A. The loss exposure cannot be modified through risk control.

B. Modifications to policy provisions, deductibles, or limits do not make the risk acceptable.

C. The class of business is not covered by the underwriter's treaty reinsurance.

D. Premiums for the submission are inadequate to make the risk acceptable.

Question 24

In which step of the underwriting process does an underwriter analyze hazards and consider whether the hazards make the overall level of risk desirable or undesirable?

Select one:

A. Monitor the underwriting decision

B. Make the underwriting decision

C. Gather the necessary information

D. Implement the underwriting decision

Question 25

One of the additional tasks within the underwriting division that an insurer that grants binding authority to others must perform is to

Select one:

A. Implement the underwriting decision to accept, reject, or accept with modifications.

B. Make the underwriting decision based on hazards.

C. Monitor the underwriting decision at renewal.

D. Select the classes of business to be included in the binding authority.

Question 26

Which one of the following is an example of an insurance product that might be unavailable in the admitted market but could be profitably written in the surplus lines market?

Select one:

A. Business income coverage for a retail store in a shopping mall

B. Transit coverage for a small business shipping within the continental U.S.

C. Property coverage for a single apartment complex in a moderate-sized Midwestern town

D. General liability coverage for a chain of grocery stores with a high frequency of slip-and-fall claims

Question 27

A primary reason that a surplus lines insurer would be the best choice for providing single event liability and event cancellation insurance is

Select one:

A. Reduced premiums when compared to the admitted market.

B. Excessive loss frequency making the risk unacceptable to admitted insurers.

C. Underwriting expertise and specialty forms for this exposure.

D. Unusually high limits that the risk requires.

Question 28

A start-up business is exploring the possibility of building underwater communities where residents would live, work, and play. A surplus lines insurer would be a good choice for this company primarily because

Select one:

A. Admitted insurers would charge excessive premiums to insure the exposures of this business.

B. Regulations affecting the business would be too cumbersome for admitted insurers to manage.

C. Admitted insurers would be unable to expand their coverage territory to cover this exposure.

D. Surplus lines insurers are able to identify and respond to newly emerging risks and meet the insurance needs of those customers.

Question 29

Question text

A resort in eastern Washington state has expanded its property to the extent that it requires a building property blanket limit of $20 million. A surplus lines insurer would be a good candidate for this coverage primarily because admitted insurers

Select one:

A. Do not have the appropriate forms and endorsements to cover such property.

B. Seldom have the capacity to write risk of this size.

C. Would be unwilling to write business in this territory.

D. Have little expertise in insuring resort property exposures.

Question 30

The quality of the insurer's claim-handling is

Select one:

A. An essential element of the insurance product.

B. Rarely a determining factor in an account's purchasing decision.

C. Irrelevant to insureds with large deductibles.

D. Unrelated to the services provided by most insurance products.