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Self-test answers xi

Chapter 11 self-test answers

1. A liability risk relates to the award of compensation in the event that there is legal liability to pay
damages to a third party, whereas a property risk covers loss or damage to goods or possessions of
the party insured.
2. Motor liability describes a situation where legal liability exists on the part of the insured person to a
passenger in the insured vehicle, whereas passenger accident cover pays benefits to the passenger,
usually based on a predetermined scale, without there being a need for legal liability.
3. Accumulations of risk mainly arise from the ‘own damage’ part of the account as a result of the
operation of natural perils.
4. Many personal accident risks are for short, non-recurring periods or relate to unique or unusual
events, and so are not suited to treaty reinsurance arrangements that are renewed on a yearly basis.
5. Where occupational diseases take many years to develop each insurer, and reinsurer, on cover
during the manifestation period shares a responsibility to contribute to the loss.
6. There is no requirement for an employee who has sustained a ‘scheduled’ injury to prove negligence
or breach of a legal duty on the part of the employer.
7. Reinsurers wish to discover whether there is accumulation potential with other ceding reinsurers
with whom they do business and that subscribe to the same insurance programme.
8. Professional indemnity cover operates in circumstances where a pure financial loss developing over
a period of time is sufficient to produce a claim. Since there is no identifiable accident in such cases
it is extremely difficult to pinpoint a ‘loss occurrence’ date.
9. Facultative reinsurance, because fidelity guarantee does not generate volume lines of business and
so a reinsurer can give risks individual consideration.
10. Public liability cover could be required by an owner whose horse comes into contact with other
animals or members of the public on other property or on the public highway. Reference copy for CII Face to Face Training
11. Most products are purchased with a manufacturer’s guarantee and so additional cover is not needed
until this guarantee expires.
12. Protection is provided for a ceding insurer from losses relating to a single event that triggers claims
from more than one policy or account.