Q1. Reinsurance is a form of insurance purchased by insurance companies in order to mitigate risk. Essentially, reinsurance can limit the amount of loss an insurer can potentially suffer. In other words, it protects insurance companies from financial ruin, thereby protecting the companies’ customers from uncovered losses.

Questions:

a. How do reinsurance companies work? (1 Mark)

b. What are the Reinsurance Contracts? (2 Mark)

c. Give example of reinsurances companies in KSA and describe their main services (1 Mark)

Q2. What is the concept of “Fair Value? Outline the basic difference between fair value and book value of an asset. Explain the key features of fair value defined by FASB ASC. (3 Marks)

Q3. Explain how three of the following elements can affect estimate of loss reserve. (3 marks)

üThe claims-handling process

üPolicy and exposure forms

üInflation

üLegal trends

üEnvironmental factors

üMix of claimants

üTimeliness of claim reporting by claimants

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