Surplus lines insurance is most often placed with a surplus lines insurer by

Select one:

A. Agents representing admitted insurers as exclusive agents.

B. Underwriters from admitted insurers that are unable or unwilling to write the business.

C. Knowledgeable consumers who approach surplus lines insurers directly.

D. Licensed surplus lines intermediaries such as wholesale brokers.

Question 2

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Which one of the following statements is true regarding surplus lines insurers?

Select one:

A. Only surplus lines insurers that are eligible in a particular state can insure risks in that state.

B. Surplus lines licensees are able to place insurance with any nonadmitted insurer.

C. Surplus lines insurers are ineligible to obtain reinsurance for the types of risks that they write.

D. Surplus lines insurers rarely employ risk control personnel because of the nature of the exposures that they insure.

Question 3

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A property risk that does not meet current building codes located in a hurricane-prone area has suffered several losses in the previous year. This risk would most likely be insured in the surplus lines market because it is a

Select one:

A. Standardized risk.

B. Distressed risk.

C. Unique risk.

D. High-capacity risk.

Question 4

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Nonadmitted insurers benefit consumers by

Select one:

A. Charging lower rates than admitted insurers charge for the same coverage.

B. Complying with state insurance department regulations regarding rate, form, and underwriting rules.

C. Providing coverage for loss exposures that admitted insurers are unable to insure profitably.

D. Reducing the need for admitted insurers for coverages such as workers compensation and automobile liability.

Question 5

Question text

In the absence of other tax-sharing arrangements, surplus lines premium taxes are regulated by

Select one:

A. The surplus lines intermediary's home state.

B. Every state in which the insured conducts operations.

C. The surplus lines insurer's state of domicile.

D. Only the insured's "home state."

Question6

A surplus lines transaction is initiated by

Select one:

A. A retail producer who approaches one or more surplus lines intermediaries.

B. A surplus lines intermediary who approaches an underwriting manager about binding coverage.

C. A wholesaler who approaches a retail producer bout submitting the account to appropriate markets.

D. An underwriting manager who approaches a wholesaler about qualifying a submission.

Question 7

In which step in the transaction process used by surplus lines intermediaries does the surplus lines intermediary determine whether the expertise and contacts exist to meet a particular customer's needs?

Select one:

A. Preparing the submission

B. Providing ancillary services during the policy period

C. Qualifying the submission

D. Submitting the account to the selected insurers

Question 8

In the third step in the transaction process, submitting the account, a surplus lines intermediary is most likely to be concerned with

Select one:

A. Allowing adequate lead time to quote the account.

B. Whether to present the quote to the customer jointly with the retail agent.

C. Acquiring complete, and current financial information from the customer.

D. Whether particular insurers are willing to consider the account.

Question 9

To satisfy the diligent search requirement, state laws and regulations often specify the

Select one:

A. Number of declinations needed.

B. Amount of time required to complete, a diligent search.

C. Locations of insurers that must decline the risk.

D. Names of insurers that must decline the risk.

Question 10

Surplus lines intermediaries

Select one:

A. Are not required to obtain a license in any state.

B. Cannot acquire a nonresident license in states other than their home state.

C. Are licensed on a resident basis in their home state.

D. Must obtain a federal surplus lines broker's license.

When binding coverage and delivering the policy, a surplus lines intermediary acting as a broker should be especially careful to

Select one:

A. Include a pricing comparison, insurer financial ratings, and a comparison of policy terms and conditions.

B. Ensure that the binder is issued correctly and that the policy agrees with the binder in all material respects.

C. Prepare ,a complete , and accurate submission including loss history and financial information.

D. Explain that surplus lines insurers do not participate in state insurance guaranty funds.

Question 12

In addition to general functions performed by surplus lines intermediaries, one of the additional functions of a wholesale broker is to

Select one:

A. Collect premium taxes.

B. Maintain documentation.

C. Provide counseling to identify loss exposures.

D. Prepare complete submissions for surplus lines underwriters.

Question 13

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

Select one:

A. Maintaining documentation.

B. Filing diligent search affidavits.

C. Prospecting.

D. Selling.

Question 14

A specialist who has been carefully evaluated and accredited by Lloyd's to negotiate competitive terms and conditions with Lloyd's underwriters is

Select one:

A. A Lloyd's program manager.

B. A Lloyd's broker.

C. An underwriting manager.

D. A managing general agent.

Question 15

A surplus lines insurer is considering offering a product that has a high volume of transactions requiring intensive hands-on staff involvement. Which one of the following factors affecting a surplus lines insurer's decisions about what products to offer would be most important in this case?

Select one:

A. Financial resources

B. Reinsurance

C. Regulation

D. Processing requirements

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 premium.

B. Loss exposure through risk control.

C. Insurer's retention through facultative reinsurance.

D. Policy provisions, deductibles, and limits.

Question 17

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

Select one:

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

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

Question 18

An insurer is domiciled and licensed in only New York and meets the criteria imposed by Pennsylvania's surplus lines law. In California, this insurer would be considered

Select one:

A. An alien admitted insurer.

B. A foreign nonadmitted insurer.

C. An alien nonadmitted insurer.

D. A domestic eligible surplus lines insurer.

Question 19

To be an eligible surplus lines insurer in a given state, a nonadmitted insurer domiciled in the U.S. must

Select one:

A. Maintain a trust fund or other collateral in the U.S. and submit financial statements to the state.

B. Be licensed in its home state and have capital and surplus equal to $15 million or the amount specified by the state.

C. Receive special authorization from the NAIC and appear on the Quarterly Listing of Alien Insurers.

D. Appear on a list of permitted insurers maintained by the International Insurers Department of the NAIC.

Question 20

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. Gather the necessary information

C. Implement the underwriting decision

D. Make the underwriting decision

Question 21

Among the functions performed by surplus lines intermediaries, an MGA's most important responsibility is to

Select one:

A. Prepare submissions that present all of the information underwriters need to evaluate and quote on a risk.

B. Follow the underwriting guidelines and binding authority the insurer has specified.

C. Meet with the underwriter in person to review the submission and involve the retail producer in the discussion.

D. Prepare material that the retail agent can use when making a presentation to the customer.

Question 22

One activity performed by many surplus lines stamping offices, or surplus lines associations, is to

Select one:

A. Obtain the required number of declinations for each account submitted to a surplus lines insurer.

B. Pay annual licensing fees to ensure that surplus lines brokers' licenses remain in effect.

C. Advocate regulatory and legislative changes to improve access to surplus lines insurance.

D. Establish and maintain relationships with retail brokers to promote program business.

The solvency of surplus lines insurers is

Select one:

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

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

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

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

Question 24

One factor that may dictate a surplus lines insurer's classes of business is the

Select one:

A. Level of accounting expertise available to the insurer.

B. Laws governing ownership of insurers in the state of domicile.

C. Individual and business tax rate in the insurer's state of domicile.

D. Surplus lines insurer's reinsurance program.

Question 25

Which step in the underwriting process is represented when the underwriter reviews the application, risk control reports, and financial information from a financial rating service?

Select one:

A. Implement the underwriting decision

B. Monitor the underwriting decision

C. Gather the necessary information

D. Make the underwriting decision

Question 26

Which one of the following statements is true regarding surplus lines insurance policies?

Select one:

A. Surplus lines insurers rarely differentiate their products from those used by admitted insurers.

B. Surplus lines insurers often use standard forms and endorsements.

C. Surplus lines brokers are not involved in developing policies or endorsements.

D. Surplus lines insurers typically draft policies "from scratch."

Question 27

A business that manufactures toys is plagued with large claims from one particular product line of toys. Admitted insurers have declined to write the general liability insurance for this business. How could a surplus lines insurer profitably write, this account?

Select one:

A. By implementing a small liability deductible for operations liability claims

B. By adding an exclusion for liability resulting from the particular product line of toys

C. By endorsing the policy to exclude personal and advertising injury claims

D. By eliminating coverage for premises liability claims

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 be unable to expand their coverage territory to cover this exposure.

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

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

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

Question 29

The process by which an insurer screens applicants for insurance and decides which applicants to accept, what policy provisions to use, and what price to charge for the insurance is called

Select one:

A. Underwriting.

B. Pricing.

C. Risk control.

D. Risk selection.

Question 30

The quality of the insurer's claim-handling is

Select one:

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

B. Irrelevant to insureds with large deductibles.

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

D. An essential element of the insurance product