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.