🏛️ The Irish insurance market; risk & risk management

1. Which body holds sole statutory responsibility in Ireland for both authorising insurance undertakings and intermediaries and for supervising their prudential soundness and conduct of business?

1. Insurance Ireland
2. Financial Services and Pensions Ombudsman
3. Central Bank of Ireland
4. Health Insurance Authority

The Central Bank of Ireland is the single statutory authority for authorisation and for both prudential and conduct supervision of insurers and intermediaries; Insurance Ireland is a trade body, the FSPO resolves consumer complaints rather than authorising firms, and the HIA regulates only the health insurance market's community rating and risk equalisation scheme. (Central Bank Reform Act 2010; Central Bank Act 1942 (as amended); Central Bank (Supervision and Enforcement) Act 2013)

2. Insurance Ireland's principal role in the Irish market is best described as which of the following?

1. The statutory regulator responsible for authorising insurance undertakings
2. The industry representative body promoting the interests of insurance companies
3. The compensation scheme that pays claims of an insolvent non-life insurer
4. The body that compensates victims of uninsured motorists

Insurance Ireland is the representative/trade association for insurance companies and is not a regulator; authorisation of undertakings rests with the Central Bank of Ireland, insolvency compensation rests with the Insurance Compensation Fund, and uninsured-driver compensation rests with the MIBI. (Insurance Ireland (representative body); Central Bank Reform Act 2010)

3. An insurer transfers part of the risk it has accepted from its own policyholders to another insurance undertaking, in return for a premium. This second undertaking is best described as:

1. a co-insurer
2. an intermediary
3. a reinsurer
4. a captive insurer

A reinsurer accepts risk ceded by a primary (direct) insurer in exchange for a premium, spreading the primary insurer's exposure; a co-insurer shares one risk jointly with the original insurer rather than accepting a cession, and an intermediary arranges cover rather than accepting risk. (General principles of insurance; public APA CIP-01 syllabus (market participants — reinsurance))

4. A pedestrian is injured by a driver who flees the scene and cannot be identified. Which body is responsible for compensating the pedestrian for this road traffic accident?

1. Injuries Resolution Board
2. Insurance Compensation Fund
3. Insurance Ireland
4. Motor Insurers' Bureau of Ireland (MIBI)

The MIBI compensates victims of accidents caused by uninsured or untraced (hit-and-run) drivers under its Agreement; the Insurance Compensation Fund instead addresses unpaid claims of an insolvent insurer, and the Injuries Resolution Board assesses personal injury compensation rather than funding it. (Motor Insurers' Bureau of Ireland (MIBI) Agreement with the Minister for Transport; Insurance Act 1964)

5. Under the Minimum Competency Code 2017, from what date must individuals who advise on or arrange retail insurance products meet the prescribed minimum competency requirements?

1. 1 October 2018
2. 1 January 2016
3. 3 January 2018
4. 1 January 2018

The Minimum Competency Code 2017 and Minimum Competency Regulations 2017 took effect on 3 January 2018; 1 October 2018 instead marks the Insurance Distribution Regulations, and 1 January 2016 marks the start of Solvency II. (Central Bank of Ireland, Minimum Competency Code 2017 and Minimum Competency Regulations 2017 (s.48(1) Central Bank (Supervision and Enforcement) Act 2013))

6. The European Union (Insurance Distribution) Regulations 2018, which set out conduct-of-business requirements for the sale of insurance products by intermediaries, came into effect on which date?

1. 3 January 2018
2. 1 January 2018
3. 1 January 2016
4. 1 October 2018

The European Union (Insurance Distribution) Regulations 2018 (S.I. No. 229 of 2018), transposing the IDD, came into effect on 1 October 2018; the other dates instead mark the Minimum Competency Code/Regulations, the FSPO's commencement, and the start of Solvency II. (European Union (Insurance Distribution) Regulations 2018 (S.I. No. 229 of 2018); Directive (EU) 2016/97 (IDD))

7. An adviser holds accreditation as an Accredited Product Adviser (APA) in the Payment Protection category only. A client who is arranging a mortgage asks the same adviser to also recommend a life assurance policy. What should the adviser do?

1. Provide the life assurance advice, since any APA accreditation permits advice across all retail insurance products
2. Decline to advise on the life assurance policy, as APA accreditation covers only the product category or categories for which the individual is accredited
3. Provide the life assurance advice, since payment protection and life assurance are treated as a single product category under the Minimum Competency Code
4. Decline to advise on either product until the adviser obtains a full QFA qualification

An APA is accredited only for the specific product category (or categories) covered by the qualification, so advice on life assurance requires separate accreditation or a broader qualification such as QFA; the adviser may continue to advise on payment protection, so declining both products is unnecessarily restrictive. (Central Bank of Ireland Minimum Competency Code 2017 (recognised qualifications); The Insurance Institute of Ireland APA programme)

8. Which of the following is NOT a role performed by Insurance Ireland?

1. Representing the collective interests of member insurance companies
2. Publishing industry statistics and market commentary
3. Authorising insurance undertakings to transact business in the State
4. Engaging with policymakers on matters affecting the insurance sector

Authorisation of insurance undertakings is a statutory function of the Central Bank of Ireland, not of Insurance Ireland, which instead performs representative, statistical and advocacy functions for its member companies. (Insurance Ireland (representative body); Central Bank Reform Act 2010)

9. A policyholder's non-life insurer becomes insolvent, leaving a valid claim unpaid; separately, a different victim is injured by a driver who has no motor insurance at all. Which statement correctly identifies the bodies that address these two situations respectively?

1. The MIBI addresses the insolvent insurer's unpaid claim; the Insurance Compensation Fund addresses the uninsured-driver injury
2. The Insurance Compensation Fund addresses the insolvent insurer's unpaid claim; the MIBI addresses the uninsured-driver injury
3. Insurance Ireland addresses both situations, as both concern insurer default
4. The Financial Services and Pensions Ombudsman pays both claims directly once a complaint is upheld

The Insurance Compensation Fund (Insurance Act 1964) pays valid claims left unpaid because of an insolvent non-life insurer, while the MIBI compensates victims of uninsured or untraced drivers; candidates commonly confuse the two schemes by reversing these roles. (Insurance Act 1964, as amended by the Insurance (Amendment) Act 2011; Motor Insurers' Bureau of Ireland (MIBI) Agreement)

10. Which of the following best distinguishes the primary focus of Solvency II from that of the Insurance Distribution Regulations, as they apply to participants in the Irish insurance market?

1. Solvency II governs how intermediaries sell insurance products, while the Insurance Distribution Regulations set the capital requirements for insurance undertakings
2. Both regimes set identical capital requirements, but Solvency II applies only to intermediaries
3. Solvency II applies only to reinsurers, while the Insurance Distribution Regulations apply only to direct insurers
4. Solvency II sets prudential capital and governance requirements for insurance undertakings, while the Insurance Distribution Regulations set conduct-of-business requirements for how intermediaries sell insurance products

Solvency II is a prudential regime governing insurers' capital adequacy and governance, whereas the Insurance Distribution Regulations govern the conduct of intermediaries in distributing products; reversing these roles, treating the requirements as identical, or restricting either regime to only reinsurers or only direct insurers is incorrect. (Directive 2009/138/EC (Solvency II); European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015); Directive (EU) 2016/97 (IDD); European Union (Insurance Distribution) Regulations 2018)

11. An individual wishes to advise on and arrange travel insurance only, without holding a full QFA qualification. Under the Minimum Competency Code, what is the appropriate route for this individual?

1. Rely on a general grandfathering provision that removes the need for any recognised qualification
2. Complete only continuing professional development hours, without any recognised qualification
3. Obtain accreditation as an Accredited Product Adviser (APA) in the travel insurance category
4. Obtain authorisation directly from Insurance Ireland to sell travel insurance

The Minimum Competency Code allows an individual to become an Accredited Product Adviser (APA) for a specific product category such as travel insurance, permitting advice and arranging within that category without the broader QFA qualification; Insurance Ireland has no authorisation function, and no exemption removes the qualification requirement entirely. (Central Bank of Ireland Minimum Competency Code 2017 (recognised qualifications); The Insurance Institute of Ireland APA programme)

12. In insurance terminology, a peril is best defined as:

1. A condition that increases the likelihood or severity of a loss
2. The cause or event that gives rise to a loss, such as fire, storm or theft
3. The uncertainty as to whether any loss will occur
4. The financial value placed on a potential loss

A peril is the actual cause of a loss, such as fire, storm or theft; a condition that increases the likelihood or severity of a loss instead describes a hazard, and the uncertainty as to whether a loss occurs describes risk. (General principles of insurance; public APA CIP-01 syllabus (principles of insurance — peril and hazard))

13. In insurance terminology, a hazard is best defined as:

1. The event itself that directly causes a loss
2. The sum insured under a policy of insurance
3. The uncertainty as to whether any loss will occur
4. A condition that increases the likelihood or severity of a loss arising from a peril

A hazard is a condition influencing the chance or size of a loss arising from a peril; the peril itself is the event that causes the loss, and the uncertainty as to whether a loss occurs describes risk rather than hazard. (General principles of insurance; public APA CIP-01 syllabus (principles of insurance — peril and hazard))

14. Storm damage occurs to a house. In relation to this loss, which of the following correctly identifies the peril?

1. The uncertainty as to whether a loss would occur
2. A condition of the property that made the loss more likely
3. The storm itself
4. The financial cost of repairing the house

The storm is the peril, i.e. the actual event causing the loss; the uncertainty as to whether a loss would occur is risk, and a property condition making the loss more likely is a hazard, not the peril. (General principles of insurance; public APA CIP-01 syllabus (principles of insurance — peril and hazard))

15. A warehouse is built from timber and is situated directly beside a fireworks factory. In relation to the risk of a fire loss at the warehouse, this construction and location represent:

1. a physical hazard
2. a moral hazard
3. a morale hazard
4. the peril itself

The timber construction and proximity to a hazardous neighbour are physical conditions of the risk that increase the likelihood or severity of a fire loss, making this a physical hazard rather than an attitude-based moral or morale hazard. (General principles of insurance; public APA CIP-01 syllabus (physical hazard))

16. During underwriting, an insurer discovers that a proposer has a history of submitting inflated claims and once left a struggling business days before a suspicious fire there. This pattern of dishonest conduct is an example of:

1. moral hazard
2. morale hazard
3. physical hazard
4. the insured peril

Moral hazard concerns the attitude, character or conduct of the insured, including dishonesty or an intention to profit from a loss, as illustrated by a history of inflated claims and a suspicious fire. (General principles of insurance; public APA CIP-01 syllabus (moral hazard))

17. A homeowner regularly leaves doors unlocked and windows open, remarking that it does not matter because the contents are insured. This attitude of carelessness, without any dishonest intent, illustrates:

1. morale hazard
2. moral hazard
3. physical hazard
4. the peril of theft

Morale hazard refers to carelessness or indifference towards loss prevention that arises simply because the insured feels protected by cover, distinguishing it from moral hazard, which involves dishonesty or intent to profit. (General principles of insurance; public APA CIP-01 syllabus (morale hazard))

18. Which of the following best distinguishes moral hazard from morale hazard?

1. Moral hazard involves dishonesty or intent on the part of the insured, while morale hazard involves carelessness or indifference without dishonest intent
2. Moral hazard involves the physical condition of the property, while morale hazard involves the cause of the loss itself
3. Moral hazard applies only to life assurance, while morale hazard applies only to non-life insurance
4. Moral hazard can only be identified at the claims stage, while morale hazard can only be identified at the underwriting stage

The two hazards are both attitudinal but differ in intent: moral hazard involves dishonest or fraudulent conduct, whereas morale hazard is unintentional carelessness arising because the insured feels covered; describing moral hazard as a physical condition of the property in fact confuses it with physical hazard and peril. (General principles of insurance; public APA CIP-01 syllabus (moral hazard and morale hazard))

19. Which of the following is NOT an example of a physical hazard affecting a fire risk?

1. A proposer who has previously been convicted of insurance fraud
2. A building with a thatched roof
3. Storage of flammable chemicals on the premises
4. A property located close to a source of open flame

A previous fraud conviction reflects the proposer's character and honesty and is therefore a moral hazard, whereas thatched roofing, stored flammable chemicals and proximity to open flame are all physical conditions of the property that increase fire risk. (General principles of insurance; public APA CIP-01 syllabus (physical hazard))

20. The term used to describe a reduced degree of care by an insured towards preventing a loss, arising simply from the existence of insurance cover, is:

1. moral hazard
2. morale hazard
3. physical hazard
4. speculative risk

This unintentional carelessness attributable to the comfort of being insured is termed morale hazard, as distinct from moral hazard (dishonest conduct) and physical hazard (a tangible condition of the property). (General principles of insurance; public APA CIP-01 syllabus (morale hazard))

21. A fire destroys a factory. Investigation shows: the fire started from an electrical fault; the factory used old wiring that had never been upgraded; and the owner, in the subsequent claim, deliberately overstated the value of the destroyed stock to increase the payout. Which term correctly describes the owner's act of overstating the claim?

1. Moral hazard
2. Physical hazard
3. The peril
4. Morale hazard

Deliberately overstating a claim is dishonest conduct by the insured and therefore a moral hazard; the old wiring is a physical hazard and the electrical fault that ignited the fire is the peril, not the owner's dishonest act. (General principles of insurance; public APA CIP-01 syllabus (peril, physical hazard and moral hazard))

22. Which of the following correctly lists the three recognised classifications of hazard used to analyse an insurance risk?

1. Physical hazard, financial hazard and moral hazard
2. Moral hazard, morale hazard and legal hazard
3. Physical hazard, morale hazard and speculative hazard
4. Physical hazard, moral hazard and morale hazard

Insurance hazards are traditionally classified as physical, moral and morale hazard; 'financial', 'legal' and 'speculative' hazard are not recognised categories within this classification, and speculative instead describes a type of risk that is not insurable. (General principles of insurance; public APA CIP-01 syllabus (classification of hazard))

23. A house built on a known flood plain is damaged when a river bursts its banks after heavy rain. Which of the following correctly identifies the hazard, as distinct from the peril, in this loss?

1. The flooding itself
2. The location of the house on the flood plain
3. The heavy rainfall
4. The uncertainty as to whether the river would burst its banks

The flood plain location is a physical condition that increases the likelihood of a flood loss and is therefore the hazard, while the flooding caused by the burst riverbank is the peril, and the uncertainty as to whether the river would burst its banks describes risk rather than hazard. (General principles of insurance; public APA CIP-01 syllabus (physical hazard))

24. Which body is the single statutory authority responsible for both the authorisation and the prudential and conduct-of-business supervision of insurance undertakings and insurance intermediaries in Ireland?

1. Injuries Resolution Board
2. Insurance Ireland
3. Central Bank of Ireland
4. Financial Services and Pensions Ombudsman

The Central Bank of Ireland is the single statutory regulator for authorisation and both prudential and conduct supervision of insurers and intermediaries. Insurance Ireland is an industry body, the FSPO handles individual complaints, and the Injuries Resolution Board assesses personal injury claims. (Central Bank Reform Act 2010; Central Bank Act 1942 (as amended); Central Bank (Supervision and Enforcement) Act 2013)

25. Insurance Ireland is best described as which of the following?

1. The prudential regulator responsible for authorising insurance undertakings
2. The representative body for insurance companies, not a regulator
3. The statutory compensation scheme for insolvent insurers
4. The tribunal that assesses personal injury claims

Insurance Ireland is the industry's representative/trade association and has no supervisory or regulatory powers. Those powers rest solely with the Central Bank of Ireland. (Insurance Ireland (representative body))

26. Which Regulations transposed the EU Solvency II Directive into Irish law?

1. European Union (Insurance Distribution) Regulations 2018
2. Minimum Competency Regulations 2017
3. Insurance Act 1964
4. European Union (Insurance and Reinsurance) Regulations 2015

Solvency II (Directive 2009/138/EC) was transposed by the European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015). The Insurance Distribution Regulations 2018 instead transpose the IDD for intermediaries. (Directive 2009/138/EC; European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015))

27. From what date has the Solvency II prudential regime applied to (re)insurers across the EU, including Ireland?

1. 1 October 2018
2. 3 January 2018
3. 1 January 2018
4. 1 January 2016

Solvency II became applicable across the EU, and in Ireland, from 1 January 2016. The other dates relate instead to the Minimum Competency Code (3 January 2018) and the Insurance Distribution Regulations (1 October 2018). (Directive 2009/138/EC; European Union (Insurance and Reinsurance) Regulations 2015 (S.I. No. 485 of 2015))

28. Under the three-pillar structure of Solvency II, governance, risk management (including the Own Risk and Solvency Assessment) and supervisory review are dealt with under which Pillar?

1. Pillar 3
2. Pillar 1
3. Pillar 4
4. Pillar 2

Pillar 2 covers governance, risk management including the ORSA, and supervisory review, while Pillar 1 sets quantitative capital requirements and Pillar 3 covers reporting and disclosure. (Directive 2009/138/EC (Solvency II))

29. Under Solvency II, the Solvency Capital Requirement is calibrated using a Value-at-Risk measure of an insurer's basic own funds at a 99.5% confidence level over a one-year period. This calibration corresponds to an implied probability of the modelled loss exceeding the SCR in any given year of approximately:

1. 5%
2. 0.5%
3. 95.5%
4. 50%

A 99.5% confidence level leaves an implied 0.5% probability (100% minus 99.5%) that losses exceed the SCR in a given year. 5% would instead correspond to a weaker 95% confidence calibration. (Directive 2009/138/EC (Solvency II), Article 101)

30. Which Regulations transposed the Insurance Distribution Directive into Irish law with effect from 1 October 2018?

1. European Union (Insurance and Reinsurance) Regulations 2015
2. Consumer Insurance Contracts Act 2019
3. European Union (Insurance Distribution) Regulations 2018
4. Minimum Competency Regulations 2017

The Insurance Distribution Directive (EU) 2016/97 was transposed by the European Union (Insurance Distribution) Regulations 2018 (S.I. No. 229 of 2018), effective from 1 October 2018. (Directive (EU) 2016/97 (IDD); European Union (Insurance Distribution) Regulations 2018 (S.I. No. 229 of 2018))

31. An adviser holds an Accredited Product Adviser (APA) qualification recognised only for personal general insurance under the Minimum Competency Code 2017. A client now asks her for advice on a life assurance savings plan. What is the correct position?

1. She may advise on it, provided she first discloses that she is not a QFA
2. She may advise on it, because APA status covers all retail financial products
3. She may advise on it, once a Central Bank waiver has been obtained
4. She may not advise on it, as her accreditation is confined to that category

An APA is accredited to advise on and arrange only the specific product category for which the qualification is recognised; advising across all categories requires a broader qualification such as QFA. (Central Bank of Ireland Minimum Competency Code 2017 (recognised qualifications); The Insurance Institute of Ireland APA programme)

32. When did the Minimum Competency Code 2017 and Minimum Competency Regulations 2017 take effect?

1. 1 January 2018
2. 1 January 2016
3. 3 January 2018
4. 1 October 2018

The Minimum Competency Code 2017 and Minimum Competency Regulations 2017, made under section 48(1) of the Central Bank (Supervision and Enforcement) Act 2013, took effect on 3 January 2018; 1 January 2018 is instead when the FSPO commenced operations. (Central Bank of Ireland, Minimum Competency Code 2017 and Minimum Competency Regulations 2017 (s.48(1) Central Bank (Supervision and Enforcement) Act 2013))

33. Which body independently investigates and resolves consumer complaints against insurance undertakings and intermediaries in Ireland?

1. Motor Insurers' Bureau of Ireland (MIBI)
2. Central Bank of Ireland
3. Health Insurance Authority
4. Financial Services and Pensions Ombudsman

The Financial Services and Pensions Ombudsman, established under the Financial Services and Pensions Ombudsman Act 2017, independently investigates and resolves individual consumer complaints. MIBI instead compensates victims of uninsured or untraced drivers, and the Central Bank supervises the market rather than adjudicating individual complaints.

34. An authorised non-life insurer is declared insolvent and a policyholder has an admitted claim of €1,000,000. Subject to High Court approval, the Insurance Compensation Fund may pay the lesser of 65% of the sum due or €825,000. What is the maximum amount payable to this policyholder from the Fund?

1. €1,000,000
2. €825,000
3. €536,250
4. €650,000

65% of €1,000,000 is €650,000, which is lower than the €825,000 cap, so €650,000 is the amount payable; choosing the €825,000 cap ignores that the lesser of the two figures applies. (Insurance Act 1964, as amended by the Insurance (Amendment) Act 2011)

35. Under the Consumer Insurance Contracts Act 2019, which of the following is NOT a duty imposed on a consumer applying for insurance?

1. To answer the insurer's specific questions honestly
2. To answer the insurer's questions with reasonable care
3. To volunteer, without being asked, every fact they believe might be material to the insurer
4. To answer honestly any further questions asked by the insurer at renewal

The 2019 Act abolished the consumer's pre-contract duty of utmost good faith and voluntary disclosure; the consumer now only has to answer the specific questions the insurer asks, honestly and with reasonable care. (Consumer Insurance Contracts Act 2019, sections 8 and 14)