Assignment Question(s): (15 Marks)
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. (5 Mark)
Questions:
a. How do reinsurance companies work?
b. What are the Reinsurance Contracts?
c. Give example of reinsurances companies in KSA and describe their main services
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. (5 Marks)
Q3. XYZ Company has the following financial data: (5 marks)
| Particulars | Amounts (SAR) |
| Total Profit for the Year | 377,500 |
| General Takaful Assets (Year 2014) | 1,390,000 |
| General Takaful Assets (Year 2015) | 1,517,500 |
| Cash | 11,500 |
| Short-term Investment | 23,500 |
| Short term liabilities | 85,000 |
| Underwriting Surplus Distributable to Participants/Participants’ Share of Profit | 145,500 |
| Gross Contribution | 958,000 |
| Net Contribution | 662,500 |
| Wakalah Fee | 77,500 |
| Commission Paid | 28,300 |
| Management Expense | 58,000 |
| Net Claim Incurred | 287,500 |
| Earned Contribution | 632,500 |
You are required to calculate:
- Return on Assets
- Quick Liquidity
- Surplus Distribution Ratio
- Expense Ratio
- Claims Ratio
