Pass the IIC Chartered Insurance Professional (CIP) C11 Questions and answers with CertsForce

In the structure of reinsurance practices explained inPrinciples and Practice of Insurance, aretrocessionaireis the reinsurer that accepts risk from another reinsurer. This occurs through a process calledretrocession, where a reinsurer (the retrocedent) transfers a portion of its assumed risk to another reinsurer to further spread exposure and maintain solvency stability.

The terminology is important:

Theprimary insurerissues the original policy to the insured.

Thereinsurer(cessionaire) accepts risk from the primary insurer.

When that reinsurer then cedes part of the risk again, the receiving party is theretrocessionaire.

Retrocession is essential in risk-management frameworks because it allows reinsurers to diversify exposures and avoid concentration risks from catastrophic events. Therefore, the correct term for the second reinsurer isC. Retrocessionaire.

The Institute for Catastrophic Loss Reduction (ICLR) is a research-based organization supported by the Canadian property and casualty insurance industry. Its mission is to reduce the loss of life and property caused by natural hazards by promoting scientifically grounded mitigation strategies. One of its central goals is to encourage the development of resilient buildings and communities by advocating for improved building codes, retrofitting standards, and construction methods that reduce vulnerability to severe weather events such as hurricanes, floods, wildfires, and earthquakes.

Options A and B do not reflect the ICLR's mandate; the organization does not focus on personal weather prediction or creating mandatory evacuation procedures. Option C describes a risk-financing mechanism, not risk reduction. ICLR’s true focus is loss prevention and mitigation, specifically through cost-effective, research-supported construction and community planning measures. Therefore, the correct answer is D.

Comprehensive Explanation (150–250 words):

The termindemnifyis fundamental in insurance. To indemnify means tocompensate an insured party for actual losses or expenses incurred, restoring them as closely as possible to the financial position they occupied immediately before the loss. This principle ensures that insurance does not create profit or gain for the insured but instead acts as a financial safety mechanism to cover legitimate losses.

Indemnity is applied across many types of policies—property, automobile, liability, and more—and forms the basis of how claims are settled. When an insurer indemnifies an insured, the insurer may pay for repairs, replacement, medical expenses, or financial judgments depending on the policy coverage.

Option A,Salvage, is the insurer’s right to recover value from damaged property after paying a claim.

Option C,Pure captive, refers to an insurance company created by a parent company to insure its own risks.

Option D,Utmost good faith, is the legal duty requiring both insurer and insured to disclose all material facts.

Only“indemnify”directly describes providing compensation for an incurred loss.

Pre-loss objectives in risk management are goals an organization aims to achievebeforeany loss occurs. These objectives focus on minimizing the frequency and severity of losses, ensuring preparedness, and maintaining organizational functionality.

Operational continuityis a key pre-loss objective because it emphasizes having systems, controls, and procedures in place to ensure that operations run smoothly—even when risk exposures are present. This includes safety programs, maintenance schedules, compliance measures, and contingency planning. Operational continuity ensures the business can withstand or avoid disruptions.

Option A (external obligations) is vague and not formally defined as a risk management objective.

Option B (sustained growth) and D (business development) arebusiness goals, not pre-loss risk management objectives.

Thus, the correct answer isC: Operational continuity.

Spacecraft liability is anextremely specialized, high-severity, low-frequency riskrequiring underwriting expertise not found in standard insurers. TheLloyd’s marketis internationally known for insuring unique, complex, and unusual risks—from satellites and spacecraft to aviation and marine exposures. Lloyd’s operates as a marketplace of syndicates, allowing multiple underwriters to participate in a single risk, making it ideal for large and unusual exposures.

A health/life insurer (B) is irrelevant; they do not underwrite commercial liability exposures.

A captive insurer (C) could theoretically insure such a risk but requires the client tocreate and fundtheir own insurance company—impractical unless they are very large and sophisticated.

Government insurers (D) generally insure auto, workers' comp, or agricultural risks—not spacecraft.

Thus the best recommendation isA: Lloyd’s Insurance Market.

Risk mitigation refers to reducing the frequency or severity of potential losses. A first-time homeowner can mitigate risk by taking proactive measures such as installing smoke alarms, securing doors and windows, maintaining the property, or eliminating hazards. These actions directly decrease the homeowner’s volume of risk by reducing the probability of a loss or limiting its potential impact.

Option A—purchasing insurance—is not risk mitigation; it is risk transfer, where the financial consequences of loss are shifted to an insurer. Insurance does not reduce the likelihood of loss; it only provides compensation after loss.

Option B is the opposite of mitigation.

Option D is irrelevant to risk management.

Thus, the correct answer is C: Decrease their volume of risk.

Statutory conditions exist in property insurance legislation across Canadian provinces to ensure that insurers and insureds operate withclarity, transparency, and fairness. These conditions outline important duties such as:

Requirements for notice of loss

Duties after a loss

Conditions for voiding coverage

Fraud provisions

Replacement and salvage rules

Their main purpose is toclarify the intent of the policy and give certainty to the terms and obligationsof both parties. Because statutory conditions are mandated by law, they ensure uniform standards across all insurers and prevent inconsistent or unclear policy interpretations.

Option B is only a small subset of what statutory conditions address.

Option C is incorrect—privacy legislation like PIPEDA is separate from insurance statutory conditions.

Option D is incorrect; statutory conditions do not alter legal burden-of-proof standards.

Thus, the best answer isA.

In determining liability, the immediate (proximate) cause refers to the most direct, unbroken cause leading to the injury. In this sequence, the firecracker explodes in Celina’s hands immediately after she receives it from Sandra. Although Antonio initiated the chain of events and Brett contributed, their actions are more remote.

The last voluntary act that directly placed the dangerous object in the position where it caused harm was Sandra’s throw to Celina. Sandra’s action is therefore the immediate cause, even though earlier individuals may share legal responsibility in a broader causation analysis.

Option D is incorrect because Celina did not cause her own injury; she merely received the firecracker.

Option C includes Antonio and Brett, but neither was the final actor in the chain.

Therefore, the immediate cause of loss is B: Sandra.

When apolicyholder(the insured) cancels a policy before its natural expiry date, insurers applyshort rate cancellation. Under short rate cancellation, the insurer refunds the unearned premiumminus a penalty. This penalty is applied because early cancellation disrupts expenses already incurred by the insurer, such as acquisition and administrative costs.

By contrast:

Pro rata cancellation (A)applies when theinsurercancels the policy — this provides the insured with thefullunearned premium refund, without penalties.

Half-term (B)is not a recognized cancellation method.

Partial-term (D)is also not an insurance cancellation method.

Thus, when the insured initiates cancellation, the correct method applied isshort rate.

A telephone adjuster (often called an inside adjuster) handles claims that can be resolved quickly without requiring in-person investigation. Their main role is to efficiently process a high volume of straightforward claims, such as small auto physical-damage losses, minor property losses, and simple theft claims.

Because these claims do not require field investigations, telephone adjusters focus on gathering information by phone, confirming coverage, arranging payments, and closing files promptly.

Option B is incorrect—telephone adjusters do not take instructions from staff adjusters; they operate independently within their own authority levels.

Option C is incorrect—they do not process paperwork for independent adjusters.

Option D is incorrect—they are not intermediaries; they serve the insurer directly.

The correct function is A: processing a large volume of claims.