SOFE SOFE Certification SOFE-CFE Questions & Answers

• Question 41:

  Where it is not possible to reasonably estimate the amounts and timing of recoveries, the ____________is to be amortized using the recovery method.

  A. inceptor contract

  B. deferred gain

  C. credit loss

  D. potential benefit

  Correct Answer: B

• Question 42:

  Premiums for which contracts are to be reported as prepaid reinsurance premiums and expensed over the remaining period of the reinsurance contract or over the terms of the policies reinsured?

  A. retroactive

  B. reinsured

  C. obligatory

  D. prospective

  Correct Answer: D

• Question 43:

  Under GAAP, costs that vary with and are primarily related to the acquisition and issuance of insurance policies are known as:

  A. application assistance policy costs

  B. insurance policy acquisition costs

  C. deferred policy acquisition costs

  D. cause and effect costs

  Correct Answer: C

• Question 44:

  Which of the following is the condition, which must be met, for a contract to indemnify the ceding company against loss or liability relating to insurance risk?

  A. The reinsurer has assumed significant risk

  B. It is reasonably possible that the reinsurer may realize a significant loss

  C. Both A and B

  D. Neither A nor B

  Correct Answer: C

• Question 45:

  If the return on the investments is negative, _______________ owes the ceding company an amount equal to the negative return.

  A. serving company

  B. assuming company

  C. financing company

  D. Capital Company

  Correct Answer: B

• Question 46:

  Property-casualty insurance companies have essentially which of the following expense categories:

  A. acquisition, maintenance, overhead

  B. repurchases, maintenance, overhead

  C. acquisition, performance, overhead

  D. acquisition, testing, maintenance

  Correct Answer: A

• Question 47:

  Under the hedge of a net investment in a foreign operations model, the _____________ is recorded on the balance sheet at fair value with changes in fair value as a component of other comprehensive income

  A. derivative

  B. adjustment accountability

  C. foreign operations

  D. company investment

  Correct Answer: A

• Question 48:

  To determine whether a contract has an embedded derivative which criteria must be met?

  A. It must be considered a derivative if freestanding

  B. It is clearly and closely related to the host

  C. The contract is already carried at fair value through earnings

  D. All of the above

  Correct Answer: A

• Question 49:

  If the referenced investment portfolio return is positive, the ceding company owes the return to the ceding company.

  A. True

  B. False

  Correct Answer: A

• Question 50:

  A derivative is a financial instrument or other contract with which key characteristic?

  A. An underlying and a notional amount

  B. no initial net investment

  C. the ability to "net settle" the contract

  D. All of the above

  Correct Answer: D