Chartered Property Casualty Underwriter Examination

1.In property-casualty practice, risk is best defined as which of the following?

2.Lightning strikes Kindling Lumber and ignites stacked timber. In insurance language, the lightning is which of the following?

3.Lantern Theater leaves a stairwell light burned out for months. How should that condition be classified?

4.Which exposure is a pure risk, the kind of risk insurance is suited to address?

5.A developer buys land that may produce a large profit or a large loss. Why is that purchase a poor fit for insurance?

6.Quill Bookstore begins a formal risk-management process. Which action comes first?

7.Solace Clinic has listed its loss exposures. Which action is the analysis step?

8.Which group correctly names four ways to treat risk?

9.North Pier Marina refuses to offer fueling, so it never takes on a fuel-spill exposure. Which treatment is that?

10.Red Clay Foundry adds sprinklers and trains a fire brigade, and the foundry keeps operating. Which treatment is this?

11.Birch Hotel keeps a cash fund and pays all guest-property losses under $2,500 itself, with no insurance for that layer. Which treatment is the fund?

12.Brightline Printers pays a premium so an insurer will pay covered liability claims. Which statement describes that purchase?

13.Kite Grocery installs cameras, keeps a $1,000 theft deductible, and insures theft losses above that amount. What does this mix show?

14.Which set lists main operations of a property-casualty insurer?

15.Which statement best describes underwriting?

16.Ratemaking at a property-casualty insurer is best described as which activity?

17.A covered roof collapse is reported at Umber Textiles. Which operation determines whether it is covered and what is owed?

18.Which description fits reinsurance?

19.A reinsurer agrees in advance to accept a fixed share of every policy in an insurer's commercial auto class. What kind of arrangement is that?

20.An underwriter asks a reinsurer to accept one stadium and no other account. Which placement is that?

21.Under a pro rata reinsurance arrangement, how are premium and loss divided?

22.A ceding insurer keeps the first $250,000 of each liability loss. The reinsurer pays only the part above $250,000, up to the cover limit. Which structure is the layer above $250,000?

23.Wind damages the roof and inventory of Fern Apparel. No one outside the store is suing. Which coverage is designed for this loss?

24.A shopper slips at Linden Grocers. A court finds the grocer legally responsible and awards damages. Which coverage is meant to pay the shopper?

25.Which statement about workers compensation is accurate?

26.A roof has a replacement cost of $48,000 and depreciation of $18,000. What is the actual cash value?

27.A building is worth $200,000. The limit carried is $160,000, the coinsurance clause is 80 percent, the covered loss is $40,000, and the deductible is $1,000. What is payable?

28.Hearth Bakery's building is worth $400,000. The policy has an 80 percent coinsurance clause and a limit of $240,000. A covered loss is $80,000, and the deductible is $2,000. What is payable?

29.Worn wiring inside Lantern Theater is best labeled as which hazard?

30.After a real kitchen fire, the owner of Vesper Catering adds items to the inventory list that were not lost. Which term fits that padding?

31.Because a delivery fleet is insured, drivers stop locking parked vans. Nothing is staged. Which hazard is this?

32.Why does a property insurer want a large number of similar, independent exposures?

33.Which feature makes a loss exposure a better candidate for insurance?

34.People who know they face a higher chance of loss are more eager to buy insurance at a standard price. What is that tendency called?

35.On an application for Willow Warehousing, which fact is material?

36.An applicant must disclose material facts the insurer needs in order to select and price the risk. Which principle does that duty reflect?

37.A producer tells a buyer that a property policy covers flood. The policy excludes flood. Which statement is correct?

38.Asked about prior losses, an applicant deliberately omits a large fire from last year. That fire would have changed the underwriting decision. What is the omission?

39.The indemnity principle in property insurance mainly seeks which result?

40.Recovery for a damaged commercial building generally requires the insured to have an insurable interest at which time?

41.An insurer pays its insured for a covered fire caused by a negligent contractor. Which right may the insurer then pursue?

42.Which statement correctly distinguishes ownership of insurers?

43.What is a binder?

44.In a property-casualty policy, which part contains the insurer's basic promise to pay?

45.Why does a commercial policy contain exclusions?

46.A policy condition requires prompt notice of a loss. That condition is best described as which of the following?

47.What does an endorsement do?

48.A property policy covers direct physical loss from any cause except the causes it excludes. How is that approach described?

49.A property policy pays only for fire, lightning, and explosion. Which description fits?

50.A fire destroys ovens at Hearth Bakery. The bakery also loses profit while repairs are underway. The lost profit is which kind of loss?

51.Business income coverage is mainly intended to pay which of the following after a covered property loss shuts a firm?

52.After a covered fire, Maple Walk Clinic rents temporary rooms and equipment so it can keep treating patients. Fee income is largely preserved. Which coverage targets those added costs?

53.Fieldstone Cannery stops production because a covered fire at its only can supplier halts deliveries. The cannery itself is not damaged. Which coverage fits the cannery's lost income?

54.Why do commercial property policies use a coinsurance clause?

55.An agreed-value approach on commercial property is used mainly for which purpose?

56.One limit of $2,000,000 applies to two warehouses at different addresses, rather than a separate limit for each. What is that arrangement called?

57.A policy pays replacement cost if the damaged property is actually replaced. How does that differ from actual cash value?

58.Coinsurance is satisfied, the limit is adequate, and a covered loss is $45,000 with a $5,000 deductible. What does the deductible represent, and what is payable?

59.A building is worth $500,000. Coinsurance is 80 percent, the limit carried is $300,000, the covered loss is $40,000, and the deductible is $1,000. What is payable?

60.A building worth $100,000 is insured for $80,000 with an 80 percent coinsurance clause. The covered loss is $16,000 and the deductible is $1,000. What is payable?

61.Coinsurance is satisfied. The covered loss is $150,000, the deductible is $1,000, and the property limit is $100,000. What is the most the insurer pays?

62.A lender is named on a commercial building policy under a mortgage clause that protects the lender against certain acts of the owner. Why is the lender named?

63.A building owner wants a contractor to have liability protection under the owner's policy for covered claims, as the policy wording allows. Which status fits?

64.A landlord is listed only as a certificate holder. The certificate says it does not amend the policy. Which statement is true?

65.Sable Repair damages a customer's generator while the generator is in the shop. A typical liability policy excludes property damage to property of others in the insured's care, custody, or control. What follows for program design?

66.Orchid Dry Cleaning holds customers' clothes, and a covered fire destroys those clothes. Which statement is sound?

67.A clinic is half built when a covered windstorm damages the unfinished structure. Which coverage is designed for the building during construction?

68.Materials that Plover Construction will install are damaged by a covered peril at the job site before installation is finished. Which inland marine approach fits?

69.An insurer incorporated in this state is writing insurance in this state. How is that insurer classified here?

70.Harborlight Wholesalers' own goods are damaged by a covered peril on a truck between its warehouse and a customer. Which coverage fits those goods?

71.A customer proves that a store owed a duty, breached it, and caused injury that produced damages. Which legal theory is that?

72.A Summit Delivery driver, while making assigned stops, negligently injures a pedestrian. The firm itself did nothing careless. Why may the firm still be liable?

73.In most cases, a store is not vicariously liable for negligence of an independent contractor it hires. Which situation is a recognized exception?

74.A tenant agrees in the lease to hold the landlord harmless for liability arising from the tenant's operations. What is that agreement?

75.A liability policy covers bodily injury that occurs during the policy period, even if the suit is filed the following year. Which trigger is that?

76.Nimbus Design's professional policy covers claims first made during the policy period for acts after a stated retroactive date. Which description fits?

77.A claims-made policy ends. The insured buys the right, for an extra period, to report claims arising from acts within the prior coverage. What is that right often called?

78.A commercial liability policy has a $1,000,000 limit per occurrence and a $2,000,000 general aggregate. Three covered occurrences cause $900,000, $900,000, and $900,000 of damages. Ignoring defense, what is the most the aggregate allows for all three?

79.Which statement about liability defense costs is accurate?

80.A plumber's faulty joint bursts and ruins a customer's ceiling and furniture. The customer sues. A typical commercial liability policy is more likely to do which of the following?

81.A balcony railing fails a year after Quarry Road Contractors finished the job and left. A visitor is hurt. The contractor no longer controls the site. Which exposure is this?

82.Arlo Painting drops a ladder on a visitor while the painting job is still underway. Which liability exposure is that?

83.In commercial liability wording, libel committed in an advertisement is usually which category, rather than bodily injury?

84.Which statement about insurance regulation in the United States is accurate?

85.In most states, an employee who receives workers compensation for a covered injury generally cannot also do which of the following?

86.Why is employers liability often written together with workers compensation?

87.An employer's workers compensation price is modified because its own loss history is better than the class average. What is that modification?

88.Where it is allowed, an underwriter gives a credit for strong safety work and a debit for poor housekeeping at one factory. Which rating tool is that?

89.A large firm's liability premium will be adjusted after the term based on its own losses, subject to a minimum and a maximum. Which plan is this?

90.A workers compensation policy was priced on estimated payroll. After the term, payroll is checked and the premium is adjusted. Why?

91.For a products-liability exposure, which exposure base is commonly used to set the price?

92.A published loss cost states expected losses. The insurer then adds expenses, taxes, and a margin for profit and contingencies. What is that addition?

93.Which figure is a pure premium, or loss cost, rather than a full gross rate?

94.Loss ratio means incurred losses and loss-adjustment expense divided by earned premium. Expense ratio means underwriting expenses divided by written premium. Losses and loss-adjustment expense are $650,000. Each premium figure is $1,000,000. Underwriting expenses are $280,000. What is the combined ratio?

95.An insurer's combined ratio is 108 percent. Which conclusion is sound?

96.A property insurer collects premium now and pays many claims months later. Which statement about the funds held in between is accurate?

97.What is a loss reserve?

98.What does a reserve for losses incurred but not reported represent?

99.An annual premium of $12,000 is written on January 1. Assume one-fourth of the term has expired by the end of March. Ignoring other adjustments, how much of that premium is still unearned?

100.Which statement fairly contrasts statutory accounting used for solvency oversight with general-purpose accounting used for investors?

101.Policyholders' surplus is best described as which amount?

102.An insurer writes a very large volume of premium compared with its policyholders' surplus. What does that high leverage mean?

103.Which is a recognized reason for an insurer to buy reinsurance?

104.A quota-share treaty cedes 40 percent of premium and 40 percent of loss. Ignore commission. Premium is $200,000 and a covered loss is $50,000. What loss amount does the reinsurer pay?

105.Excess-of-loss reinsurance attaches at $100,000 and provides $400,000 of cover above that attachment. A covered loss is $350,000. What does the reinsurer pay?

106.How can a quota-share treaty provide surplus relief to a growing insurer?

107.A reinsurance treaty follows the fortunes of the ceding insurer. Which result fits that approach?

108.Every insurer licensed in the state declines an unusual chemical risk. A specially licensed broker then places it with an eligible unlicensed insurer. Which statement is correct?