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A drug being sold by a pharmaceutical company is being prescribed to hundreds of millions of people. Liability coverage for this exposure would most likely be written in the surplus lines market because the risk is

Select one:

A. Distressed.

B. Unique.

C. Standardized.

D. High-capacity.

Question 2

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. High-capacity risk.

B. Unique risk.

C. Standardized risk.

D. Distressed risk.

Question 3

Which one of the following is true about nonadmitted insurers?

Select one:

A. Consumers obtain rate and form concessions from nonadmitted insurers that they would not be able to obtain from admitted insurers.

B. Insurance producers are able to change the coverage terms and rates from nonadmitted insurers.

C. Nonadmitted insurers are typically not required to obtain approval for their rates, forms, and underwriting rules.

D. Insurance regulators require nonadmitted insurers to assume a share of undesirable risks in each state.

Question 4

Nonadmitted insurers benefit consumers by

Select one:

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

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

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

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

Question 5

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 complete and accurate submission including loss history and financial information.

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

Qestionb6

In which step in the transaction process used by surplus lines intermediaries does the surplus lines intermediary analyze loss exposures and understand the rating process for that exposure?

Select one:

A. Preparing the submission

B. Presenting the quotes

C. Submitting the account

D. Qualifying the submission

Question 7

In the surplus lines marketing system, an underwriting manager

A. Represents one or more insurers and generally has binding authority.

B. Acts on behalf of a single insurer and assumes the role of a branch office for that insurer.

C. Places business with a number of surplus lines insurers and usually operates within its state of domicile.

D. Operates through syndicates of members who provide capital and accept surplus lines risks.

Question 8

In the insurance marketing system, the individual who deals directly with insurance buyers to obtain coverage in the standard market is best described as

Select one:

A. A managing general agent.

B. A national wholesaler.

C. An independent wholesale broker.

D. A retail producer.

Question 9

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

Select one:

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

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

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

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

Question 10

Surplus lines intermediaries with expertise in a particular area or with an insurer contract limited to a specific program are called

Select one:

A. Underwriting managers.

B. Program managers.

C. Lloyd's brokers.

D. Managing general agent

Question 11

Regulation of surplus lines insurance is accomplished through

Select one:

A. Federal legislation controlling surplus lines insurers' activities.

B. Federal regulations and administrative rules affecting surplus lines intermediaries.

C. State legislation and regulations affecting surplus lines insurers.

D. State control and monitoring of surplus lines intermediaries.

Question 12

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. An underwriting manager.

B. A Lloyd's broker.

C. A Lloyd's program manager.

D. A managing general agent.

Question 13

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. Submitting the account to the selected insurers

C. Providing ancillary services during the policy period

D. Qualifying the submission

Question 14

Which one of the following members of the surplus lines marketing system has binding authority from the surplus lines insurers that it represents?

Select one:

A. Retail producers

B. National wholesalers

C. Managing general agents

D. Independent wholesale brokers

Question 15

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

Select one:

A. A domestic admitted insurer.

B. An alien surplus lines insurer.

C. A foreign nonadmitted insurer.

D. An eligible surplus lines insurer.

Question 16

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. A foreign nonadmitted insurer.

B. A domestic eligible surplus lines insurer.

C. An alien nonadmitted insurer.

D. An alien admitted insurer.

Question 17

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

Select one:

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

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

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

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

Question 18

A surplus lines underwriter decides to accept a property submission but endorses the policy to exclude all losses resulting from explosion regardless of cause. This is an example of modifying the

Select one:

A. Policy premium.

B. Insurer's retention through facultative reinsurance.

C. Policy provisions, deductibles, or limits.

D. Loss exposure through risk control.

Question 19

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. Make the underwriting decision

C. Gather the necessary information

D. Monitor the underwriting decision

Question 20

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?

A. Financial resources

B. Regulation

C. Processing requirements

D. Reinsurance

Question 21

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

A. Collect premium taxes.

B. Provide counseling to identify loss exposures.

C. Prepare complete submissions for surplus lines underwriters.

D. Maintain documentation.

Question 22

When compared to a wholesale broker or MGA, one unique function typically performed by a program manager is to

A. Ensure that all transactions adhere to applicable statutes and regulations.

B. Practice sound management in office operation.

C. Market programs to retail agents and sometimes to other wholesalers.

D. Issue policies on the insurer's behalf

. Question 28

One factor affecting the extent of risk control services provided by surplus lines insurers is the

A. Size of the policy premium.

B. Expertise of the surplus lines insurer's underwriters.

C. State in which the surplus lines insurer is domiciled.

D. Extent of regulation affecting the surplus lines insurer.

Question 29

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 account?

Select one:

A. By eliminating coverage for premises liability claims

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

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

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

Question 30

An example of a service provided by an intermediary that is a component of the insurance product is

Select one:

A. Making selection decisions for the surplus lines insurer.

B. Developing appropriate insurance rates.

C. Reporting claims to the insurer.

D. Accurately rating and pricing the policy.