A surety bond is a written document in which one party guarantees a second party's
Performance to a third party for the second party's failure to fulfill an obligation.
Which one of the these groups, for the most part, serves the market for fidelity and surety bonds in the United States?
Multiline property-casualty insurers
Sureties use what written document to authorize a producer to act as the surety's agent in bond production?
A power of attorney
While suretyship and banking both use a prequalification process to extend credit to their customers, suretyship is different from bank credit in that
Suretyship guarantees performance as well as monetary obligations.
Because most bonds are "joint and several liability" documents, the obligee can recover losses from
The principal or the surety, or from both.
A financial guarantee differs from performance and fidelity guarantees because it requires honesty, the ability to perform the contract, and
The ability to pay money to meet the contractual obligation.
A legal remedy that a surety can use against a defaulting bond principal, in which the surety exercises its right to force the principal to perform by exhausting the principal's resources instead of its own, is
Exoneration
In an unlimited cosurety arrangement, the obligee can collect
The full loss from any of the cosureties up to the penal sum of the bond.
A bond that guarantees that faulty work will be corrected and defective materials will be replaced for a period of one year or less and that is usually provided with a performance bond at no additional cost is a
Maintenance bond
A contract bond that guarantees the local governmental authority that a principal will complete a development in accordance with approved proposals and at the principal's expense is a
Subdivision bond
This classification of license and permit bonds poses the least risk to the surety and guarantees that the principal will conform with laws that govern the business or activity it conducts.Which bond classification is described?
Compliance-only bonds
Under a public official bond guaranteeing the honesty of a treasurer,
He or she must account for the cash that he or she holds while in office.
Bond losses occur when a fiduciary and its surety are held accountable because the fiduciary did not exercise reasonable care in notifying all heirs of an impending probate proceeding. This fiduciary is called
An administrator
A person who commences an action against another to obtain an equitable remedy may be required to post a bond before the court will proceed with the action. This bond is called
A plaintiff bond
The legally mandated hazardous waste facilities performance bond
Can be posted only for hazardous waste facilities with permits, and it requires an underwriting review of the closure plan.
The principal on a hazardous waste bond
Is an owner or operator of a hazardous waste facility and is responsible for closure and postclosure care of the facility.
In the next step of the bond prequalification process, once the producer has compiled the contractor's financial documents showing significant liquidity,
The producer may facilitate underwriter interviews to help determine the contractor's experience in meeting past contractual obligations.
A contractor's percentage-of-completion estimates
Are based on the contractor's ability to estimate the cost to complete the project and recognize income and profit as they accrue during the project.
A $5 million/$20 million contract surety credit line means that the surety is willing to
Bond single jobs up to a contract price of $5 million when the aggregate contract backlog does not exceed $20 million.
Which one of the following statements is true regarding surety producers' promotion?
Participating in professional seminars and construction industry associations is an excellent way to communicate to a target audience.
When developing one aspect of the business plan, the planning group should consider their agency's philosophy and culture, management quality and commitment, team motivation and dedication, resources, and the continuity of ownership and management. Which one of the following describes this aspect of the planning process?
Identify the agency's strengths and weaknesses
Which one of these categories of court bonds is written primarily on the basis of an attorney's character and reputation for trustworthiness?
Fiduciary bonds
Producers of public official bonds serve themselves and their prospective principals by
Offering their services in September after primary elections are over and the candidates are known.
Staff underwriting activities generally include which one of the following?
Formulating underwriting policy
In the protective phase of the bond underwriting decision, indemnity is waived only for what type of bonds?
The smallest and least hazardous bonds
When a corporation has a number of subsidiaries that will all require bonds, what type of agreement can be used that would allow the parent to provide indemnity for its current subsidiaries and affiliates, as well as for companies it might acquire or form in the future.
Omnibus agreement
An example of a common addendum that might address a principal's concern about the conditions of a general agreement of indemnity (GAI) is
Spousal exemption
Generally, what type of individuals cause most public official bond losses?
Dishonest individuals
Courts often order attachment bonds to secure property when who is within the court's jurisdiction?
A nonresident defendant
Sureties underwrite both attachment and replevin bonds similarly, but they usually write replevin bonds
More quickly and for smaller amounts.
Which of the following bonds guarantee that buyers will pay farmers or other sellers of goods?
Merchandising and dealer bonds
Compliance bonds with third-party liability allow a direct right of action against which party for damages a third party may suffer because of the principal's acts?
Surety
Which special characteristic related to fidelity bonds most directly concerns the following statement?Many employers will not sign complaints or testify at criminal proceedings against their employees. They often wish to avoid damaging publicity; accept employees' "hard luck" stories; and wish to resolve matters quickly, especially when employees accused of theft promise restitution or are valuable employees.
Management might be reluctant to prosecute employee thefts.
What quality of the contractor-producer-underwriter relationship requires periodic visits to the contractor's office, visits to project sites with the contractor, and meetings with the contractor's key people concerns?
Ongoing dialogue
As part of the underwriting process, providing the surety with reliable and timely financial information and informing the surety of the business plan is whose responsibility?
Contractor
Which one of the following in a bond applicant's personal and employment history provides the surety underwriter with evidence of good character?
Trade payment record
Which of these is one of the three factors that are focused on the contractor and are considered when underwriting contract bonds for construction?
Capacity
In evaluating capacity for continuity planning, the underwriter considers what two factors?
Continuity of management and continuity of ownership
When monitoring the underwriting information of a contractor, an explanation is generally needed if the underwriter notices the contractor's bid reflects a difference in excess of what percent?
10%
The underwriter must address the contract provisions for completing the work on time. If the contractor does not complete the work on time, one of the standard solutions is what?
Liquidated damages
Under the Fair Credit Reporting Act, which one of the following indicates circumstances under which a consumer reporting agency can legally furnish a consumer credit report?
As a response to a court order or a written request of the consumer who is the subject of the report
Which one of the following includes sections of the Consumer Credit Protection Act that apply directly to the surety industry?
Titles VI and VII
Respectively, the credit terms ROI, slow 60, CIA, and COD mean
Remit on receipt of invoice, payment was received 60 days after the due date, cash payment is required in advance, and cash is required on delivery.
Which one of the following statements is true regarding the surety underwriter's use of information received from financial institutions?
If the principal is highly dependent on a financial institution as determined from the information, then the conditions of the credit line are increasingly important to the surety.
Which one of the following statements is true regarding the principal as a source of underwriting information for bonding?
The principal is the primary source of direct information, including identification, historical, management, financial, bank, and performance information.
Under which heading of the Payment section of D&B's Business Information Report (BIR) is there a summary of the company's payment history, including each vendor's experience during the previous twelve months?
Paying Record
One of Dun & Bradstreet, Inc.'s (D&B) primary sources of information for its reporting database comes from which one of these sources?
The surety principal
Which one of the following controls the information that consumer credit report providers place in their files and how they place it?
The Equal Credit Opportunity Act and the Fair Credit Reporting Act.
Which one of the following statements is correct?
From a regulator's perspective, if an insurer's ratio of written premium to policyholders' surplus exceeds 3 to 1, the insurer is selling more insurance than is prudent relative to the size of its net worth.
Which one of the following statements regarding reinsurance is true?
Reinsurance agreements typically require the primary company to retain part of its original liability.
Facultative reinsurance
Involves more administrative expense than treaty reinsurance transactions.
Which one of the following describes a type of excess of loss reinsurance that anticipates a regular pattern of reinsured losses and is typically rated using an experience-sensitive mechanism?
Working cover reinsurance
In surplus work program reinsurance, when is surplus ceded to the reinsurer?
When the surety's expression of aggregate risk appetite for each contractor is reached, the surplus is ceded to the reinsurer.
Reinsurance pools, syndicates, and associations are
Groups of insurers that share the loss exposures of the group, usually through reinsurance.
Fidelity bond claims
Can expose an insurer to waiver of a condition precedent of bond contracts and defamation actions, if they are not handled properly.
Which one of the following statements regarding surety compliance with statutes and regulations is true?
Surety and fidelity contracts are often prescribed by statute or regulation, including requirements for many license and permit bonds, fidelity coverages, and public official bonds.
Which one of the following is identified as a possible obligation of the surety in a fidelity claim?
Surety claims personnel should deny payment when no grounds for an obligation exist.
After a contractor admits that a contract default has occurred, surety claims personnel consider a number of questions that help them determine their course of action. Which one of the following is a question they use to evaluate claims?
What is the percentage of completion of each of the contractor's projects that are in progress?
The surety's most important right acquired through subrogation is the right of the obligee to use the contract consideration to complete the contract.
Which one of the following statements is true regarding subrogation when a contract default has occurred and when the principal has admitted to it?
Under reinsurance or cosurety agreements,
Claim personnel must be aware of the reinsurance and cosurety arrangements into which the surety has entered with respect to the risk on pending claims.
A basic type of bond that involves all situations in which sureties guarantee performance of obligations that generally do not arise from contracts is
Commercial surety bonds
Which one of the following developed in the United States to guarantee the large amounts of money involved in the country's industrial and commercial growth?
Corporate suretyship
In addition to determining the feasibility of the surety's undertaking a particular risk, the premium for the risk, and the conditions that the applicant should meet, the underwriter determines
The necessity for the principal to file collateral.
Suretyship and insurance are alike in that
Insurance commissioners regulate both.
The surety bond three-party relationship, the party who guarantees fulfillment of the obligation and who will either perform the obligation or pay the costs for its fulfillment is the
Surety
Instead of holding a principal's assets as security, a surety might choose to hold an instrument issued by a commercial bank for the principal, but with the surety named as the beneficiary. What is this instrument?
An irrevocable standby letter of credit
A surety choosing to write a risky bond typically insists that the principal post adequate collateral in the form of
A liquid asset, such as a certificate of deposit, or cash.
A type of reinsurance in which the reinsurer evaluates the submission and can accept or reject it, and which is often called "nonobligatory reinsurance," is
Facultative reinsurance
The Miller Act was passed to require principals, in addition to furnishing a performance bond, to furnish a separate payment bond guaranteeing payment of all bills incurred by the contractor
For labor and materials at the project completion for all federal jobs
Performance bonds guarantee that the obligee will be indemnified for any loss resulting from the principal's failure to perform the work
According to the contract, plans, and specifications; at the agreed price; and within the time allowed.
This classification of license and permit bonds guarantees that the principal will conduct specific business activities according to the law and protect the public from misrepresentation or fraudulent practices by the seller. Which of the following classification of license and permit bonds is described?
Merchandising and dealer bonds
In this public official category of bonds, sureties pay losses when subordinates in the principal's office cause them, as well as when the principal causes them. This described category of bonds
Is officials who handle public funds, and the principals are charged with honesty and faithful performance of duty while handling money as required by law.
The court requires a fiduciary who is named in a will to administer an estate to file a type of fiduciary bond. This fiduciary is called
An executor
One type of fiduciary bond is required of an individual who has the legal responsibility for the care of a minor or a legally incompetent person or for such a person's property. This bond is called
A guardians bond
Which one of these statements is true regarding financial guaranty bonds?
When in place, the entire issue of these bonds would have a higher investment grade, allowing municipalities to sell their bonds at a lower interest rate.
What type of miscellaneous bond do sureties often write as open penalty forms to provide for fluctuation of the value of the subject of the bond?
A lost security bond
Which one of these statements is true regarding the surety producer's role in a bonding relationship?
The producer assists the contractor and the underwriter in the bond application and analyses; when the bond or credit line is approved by the underwriter, the producer assists with communication and continues as an integral part of the contractor's management team.
Which one of the following statements is true regarding a surety producer's role in its performance of credit analyses?
The producer's credit analysis should include a recommendation of a "responsible" line of surety credit and an appropriate work program to encourage the contractor's responsible growth.
Which one of these statements regarding bids is true?
Usually, at least thirty days elapse from bid opening to contract award.
A producer who has developed a favorable percentage of the local bond market and has earned a reputation among local contractors for professional-quality service has established which one of the following?
Position
When developing an effective business plan, the planning group should identify the agency's strengths and weaknesses, and then the agency should
Focus on correcting the critical weaknesses.
Which one of these categories of court bonds is underwritten on the basis of the principal's financial capacity?
Judicial bonds
According to the law, companies that write credit enhancement financial guarantees
Cannot write any other type of insurance within that company.
A feature differentiating surety from insurance is that surety involves three parties, which include
Obligee, principal, and surety
What collateral is considered to give the surety the most protection if the principal files for bankruptcy while the bond is still in force?
Irrevocable letters of credit
Financial reports are important in bond underwriting not only because they reveal an applicant's financial condition, but also because they reflect what about the applicant?
Overall management ability
Owners of most small businesses provide sureties with financial reports that
Contain the same data they give to their banks to apply for loans.
What type of bond would make a surety liable for the difference between what should have been collected and the amount that can be accounted for, even though a public official might not have been dishonest?
Faithful performance bond.
An appeal bond is a litigation bond that is used when the principal has lost the case in lower court and is appealing that judgment to a higher court. If the appeal bond is for the plaintiff's case, what does it guarantee the payment of?
Costs of the appeal
A fiduciary bond form has no cancellation provision. Therefore, the term of the bond continues until which event occurs?
The court has relieved the fiduciary of all responsibilities.
Which of the following bonds are the most hazardous license and permit bonds that sureties write?
Reclamation and environmental protection bonds
Typical businesses using compliance-only and permit bonds are which one of the following?
Construction related
For a new firm that is not profitable, at the very least, the bond underwriter should verify which of the following?
That the firm's founders have meaningful, sufficient experience in related work
Frequently having to react to emergency or artificial deadlines indicates a lack of what quality in the contractor-producer-underwriter relationship?
Communication
What is the producer's ultimate objective in the contractor-producer-underwriter relationship?
To be as responsive as possible to the contractor's needs while presenting business that is reasonably consistent with the surety's underwriting standards
When assessing a contractor's capacity in terms of management control, what is the first step in the construction process?
Estimating
Depending on the size and type of contract, either the plant or the equipment, or both, can be a crucial measure of a contractor's
Capacity
By accounting standards, of what does working capital, the conventional measure of a firm's liquidity, consist?
Current assets less current liabilities
The surety might forfeit a bid bond if which situation exists?
The difference between bid prices is more than the amount of the bid bond.
Extending a line of credit to bond a contractor's future projects is particularly useful for what sized contractors that have what frequency of bond requests?
A larger contractor with frequent bond requests
Which one of the following identifies the government entity that has added specific requirements to meet the guidelines set out under Regulation B and provides explanations and clarifications?
The Federal Reserve Board
Which one of the following statements is true regarding sureties and credit acts and laws?
Sureties must be aware of continuous modifications by amendment, Federal Reserve Board staff commentaries, and the Federal Trade Commission.
Which one of the following names a chapter of bankruptcy that contains provisions for corporate reorganizations—a means of preserving the going-concern value of a business enterprise to the benefit of all creditors through the elimination of the factors that created the distress?
Chapter 11
The information that the surety underwriter organizes for the background investigation of a principal includes
Public information, including the principal's legal filings, such as lawsuits, judgments, tax liens, bankruptcies, reorganizations, and Uniform Commercial Code filings.
Which one of the following sources of surety underwriting information provides the most reliable information because the party has less bias with regard to the principal's bond success?
Architects and engineers
How does Experian Information Solutions, Inc. ensure that its reports provide accurate and objective information that is not manipulated by the principal or trade creditors?
The only financial information that Experian publishes comes from Standard & Poor's, and it has been audited and verified.
In D&B's Payment Analysis Report (PAR), PAYDEX is
A payment index composed of a numerical indicator ranging from 0 to 100, and in which the higher the indicator, the better the payment record of the subject business.
Which one of the following is a consumer credit report provider that offers investigative reports based on interviews and confirms unfavorable information with two or more sources?
Equifax, Inc.
Crimson Casualty Company began insurance operations last year. The company experienced phenomenal success and wrote far more premiums than expected. A representative from the state insurance department contacted Crimson Casualty and warned the company that it was growing too fast and risking insolvency. The insurance regulator added, "Of course you can use reinsurance to help remedy your situation." The regulator was referring to which one of the following functions of reinsurance?
Using reinsurance to provide surplus relief
Which one of the following is correct with regard to an insurer's line and large-line capacity?
An insurer's line is influenced by the maximum amount of insurance or limit of liability allowed by insurance regulations.
Which one of the following statements is correct with regard to the use of facultative reinsurance?
The treaty reinsurer is usually willing to allow the primary insurer to remove high-hazard loss exposures from the treaty by using facultative reinsurance.
Under which one of the following kinds of pro rata reinsurance does the surety cede a fixed percentage of each covered bond, and then the division of premiums and losses, including adjustment expenses, is automatically set at that percentage?
Quota share reinsurance
Which one of the following describes a type of reinsurance in which the ceding company is indemnified for the portion of a loss that exceeds a specified amount—the ceding company's net retention?
Excess of loss reinsurance
Which one of the following best describes why a group of insurers would choose to form a reinsurance pool, syndicate, or association?
So that the members can share the loss exposures of the group, usually through reinsurance
Which one of the following is true regarding contract bond claims?
Issues in a contract bond claim include payment to subcontractors and suppliers as well as the ultimate completion of the construction project.
Which one of the following statements regarding gathering information for surety claims is true?
Claims personnel can gather most of the needed information for a surety claim by applying the questions of who, what, when, where, why, and how to the claim.
Which one of the following statements regarding recovery rights of the surety is true?
Successful salvage collection procedures benefit the insurance-buying public in the same way that good management of insurance affairs generally benefits the public.
Surety claims against principals who appear to have resources to pay the claims can be referred to the principals and indemnitors who can respond before the surety must pay and before the surety seeks indemnification from them. This practice is called
The vouching-in procedure.
Which one of the following statements is true regarding options available to surety claims personnel after a contract default occurs and the principal admits to it?
The surety can demand that the principal and indemnitors execute mortgages and securities in the surety's favor and place them in a trust for any losses or expenses it sustains.
Cosureties on a bond
Often appoint one cosurety as the controlling cosurety to investigate, negotiate, and resolve the same claim and seek recovery of the same losses and expenses.
Bonds for which the laws specify the bond conditions and for which all three parties are dictated by the applicable law rather than the bond provisions are
Statutory bonds.
Which one of the following characteristics is unique under American personal suretyship compared with corporate suretyship?
Sureties were protected by laws that were favorable to them.
An organization that uses its collected data to calculate loss costs that member company underwriters use to determine premiums for risks is
The Surety and Fidelity Association of America (SFAA).
Which one of these is an accurate comparison of suretyship and banking?
Both suretyship and banking are financial relationships and deal with losses that are generally defined in monetary terms; however, a surety guarantees more than just an extension of credit.
A surety's liability for a surety bond can only cease to exist when the underlying obligation/agreement has
Been performed as specified in the contract or when the bond has been canceled.
A surety that is not satisfied with the principal's financial capacity, past experience, and resources other than money will probably
Provide the bond subject to additional considerations and bond requirements.
If the bond applicant is a business entity, from what parties do corporate sureties routinely require indemnity agreements?
Any persons who have major financial interests in the entity
Under a cosurety agreement for which a principal defaults on the bond, how is the cosurety's share of the risk determined and how are losses paid?
The cosurety agreement defines each cosurety's share of the loss that is paid by the designated controlling cosurety, which then collects the agreed-upon portion of loss and expense amounts from each cosurety.
Under a bid bond, if the bid is accepted and the principal refuses to enter into the contract or fails to provide the additional required bonds, subject to the penal amount of thebond, the obligee is generally entitled to be paid
The difference between the amount of the principal's bid and the next lowest bid the obligee finally accepts.
Which type of contract bond guarantees that the principal will enter into a contract and will provide the required bonds if the bid is accepted?
Bid bond
Bonds under this classification guarantee that the principal will properly account for and remit government funds collected as required.Which license and permit bond classification is described?
Tax or fee bonds
Bonds in the category of public official bonds for officials whose duties require direct involvement with members of the public
Pay losses when principals commit wrongful acts such as seizing the wrong goods or making wrongful arrests.
Judicial bonds
Are a category of court bonds that arise out of litigation and are posted by persons seeking or appealing a remedy in court.
A bond that guarantees that, if a higher court sustains an initial judgment on appeal, the defendant will pay the entire judgment, plus court costs and interest, is
A supersedeas bond.
Which one of these types of miscellaneous bonds guarantees that the principal will establish and fund a trust or will provide alternative financial insurance?
Hazardous waste facilities financial guarantee bonds
Which one of these statements is true about lost securities bonds?
The security owner signs an affidavit describing the lost security and explaining how it became lost and completes a bond application with an indemnity agreement.
Which one of the following contractor's assets would encourage a surety to underwrite contract bonds for the contractor or to extend a line of credit for bonding?
Quality stocks and bonds and accounts receivable
When selecting a surety company for a bonding relationship with a contractor,
The producer should consider the surety's suitability factors to the contractor's needs, including the surety's philosophies, financial capacity, stability, and comfort with the projects.
A surety bond credit line covers the contractor's normal, anticipated bond needs. If a special situation develops that would cause a contractor to exceed the credit line, then
The contractor and the producer should discuss the merits of the case with the underwriter to determine the desirability of an increased credit line.
Which one of the following is a factor of marketing that requires the surety producer to have education, training, knowledge, skill, and organization to provide professional service that clients need?
Product
Each one of the following steps is performed toward the beginning of the development of a contract surety business plan EXCEPT:
Change goals and action steps as the agency's strengths and market conditions change
Sureties compete for commercial surety bonds in this category on the basis of service to the agent and to the client and they usually offer substantial price discounts for accounts with larger clients. Which one of these categories of bonds is described?
License and permit and miscellaneous bonds
A standard letter of authority from a surety usually allows the producer to approve which one of the following types of bonds without the surety's approval?
Bankruptcy bonds
Line underwriting activities generally include which one of the following?
Selecting insureds
What is the name of the agreement in which the company owner agrees not to withdraw funds the company owes the owner while the bond is in force?
A subordination agreement
The contract surety indemnity agreement is
The form most surety professionals think of when they hear the term "GAI" (general agreement of indemnity).
An indemnity agreement does what to a surety's rights arising from common law?
Extends them
Despite the potential legal and political issues, why are most sureties eager to write public official bonds?
Because these bonds have proven to be profitable
Why are fiduciary bonds generally considered to be short-term obligations?
Because most estates can be handled within several months or, at most, within a year or two.
An example of a litigation bond used by a plaintiff or defendant in a lawsuit is a
Replevin bond.
Compliance-only or privilege bond penalties are usually
Nominal
Forfeiture bonds require the surety to pay what percentage of the bond penalty if the principal fails to complete an obligation?
100
As a fidelity loss control measure, all employees should take an annual vacation of at least how many consecutive days?
Five
Which quality of the contractor-producer-underwriter relationship requires underwriters and producers to follow their own underwriting convictions?
Common interests
With new accounts that another surety previously bonded, underwriters will be concerned that the contractor might have problems not readily apparent that might cause a potentially large loss. What facts might indicate that such a loss is a particularly relevant concern?
The contractor's prior surety refused to write a bond the contractor wanted.
Which of these is one of the three factors that are focused on the contractor and are considered when underwriting contract bonds for construction?
Capacity
By accounting standards, of what does working capital, the conventional measure of a firm's liquidity, consist?
Current assets less current liabilities
Which one of the following in a bond applicant's personal and employment history provides the surety underwriter with evidence of good character?
Trade payment record
Owners make progress payments on some construction projects as contractors complete each stage if what conditions exist?
Each stage is easily ascertainable and it would be difficult to estimate monthly billing accurately.
The bond underwriter must underwrite the contract, which includes determining whether it allows for a shutdown because of what type of unfavorable conditions?
Weather
Which one of the following identifies a section of the Consumer Credit Protection Act that applies to all credit transactions, commercial and personal, without regard to the nature or type of credit or the creditor?
Title VII, the Equal Credit Opportunity Act, which prevents creditors from discriminating against applicants on the basis of sex, marital status, race, color, religion, national origin, age, or receipt of public assistance income.
In general, the Equal Credit Opportunity Act (ECOA) and Regulation B affect or preempt
Only state laws that are inconsistent with federal laws and only to the extent that they are inconsisten
Which one of these statements regarding commercial transactions law is true?
Under the UCC, a creditor receives a security interest in goods in return for granting credit to a buyer.
Which one of the following statements is true regarding the surety underwriter's evaluation of a surety principal?
The underwriter needs to obtain current information quickly or risk making a bad decision on broad-based or outdated information.
Which one of the following identifies the most credible documents that the surety underwriter uses to evaluate the positive and negative information gathered?
SEC 10-K and 10-Q reports
Throughout D&B's Business Information Report (BIR), the code "E" or the code "F," respectfully, indicate
That the figures given are an estimate (E) or were obtained from a financial statement (F) on the subject business.
Which heading, in the third column of D&B's Business Information Report (BIR), provides either D&B's Capital and Credit Rating or its Employee Range (ER) designation?
Rating
Which one of the following is a consumer credit report provider that uses a network of owned and serviced credit bureaus to provide credit information for most United States households?
TransUnion
One reason that primary insurers purchase reinsurance for catastrophes is to
Stabilize insurer earnings.
Callaway Insurance Company is interested in gradually expanding its property insurance business into the wind-prone coastal areas of the southern U.S. In planning this expansion, on which one of the following goals should Calloway's reinsurance program most likely focus?
Catastrophe protection
Which one of the following statements regarding treaty reinsurance and facultative reinsurance is true?
Administrative costs per-risk are higher under a facultative reinsurance arrangement than under a treaty reinsurance arrangement.
With which one of the following major types of reinsurance agreements does the reinsurer assume a proportional share of the obligations that the surety assumes, and the reinsurer receives a proportional share of the premium that the surety charges?
Pro rata share reinsurance
In surplus share reinsurance, when is surplus ceded to the reinsurer?
When the limit of the bond is greater than the surety's retention limit, the additional amount is ceded to the reinsurer.
Which one of the following is the primary business purpose of a professional reinsurer?
To serve insurers' reinsurance needs
Contract bond claims
Can raise questions as to fault in the loss, whether the bonded principal or the obligee was responsible.
Which one of the following statements regarding the goals of the fidelity and surety claims process is true?
Once the claims personnel have determined that the surety is probably liable to the obligee under the bond, they begin the information gathering process.
Which one of the following statements regarding legal research and unfair claims practices acts is true?
Fair claims practices acts prohibit sureties and insurers from misrepresenting pertinent facts or policy provisions relating to coverages at issue.
Contract surety loss reserves are
Intended to incur the loss on the surety's balance sheet in the year in which the loss is discovered.
The actions of surety claims personnel in a contract default are limited until one of three events occurs. Which one of these events triggers a full action?
An obligee terminates the principal's right to proceed with a contract.
Which one of the following statements is true regarding financial reporting to reinsurers?
When a primary surety establishes reserves, it determines a reinsurance recoverable reserve and notes in the records that reinsurance reserves have reduced posted reserves.