IIC Updated C11 Exam Questions and Answers by faye

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.

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.

Indemnity means restoring the insured to the financial position they occupied immediately before the loss—no better, no worse. Since the loss amount is$180,000, this is the amount required to fully indemnify the insured.

Although the policy limit is$400,000, the insurer does not pay policy limits unless the loss equals or exceeds the limit. The ACV of $380,000 is irrelevant here because the loss ispartial, not total. ACV only caps reimbursement in cases of total loss or when replacement cost is not available.

Option B ($200,000) has no basis in any indemnity or co-insurance formula.

Options C and D refer to total loss payouts, not applicable here.

Thus, the amount that indemnifies Kamal isA: $180,000.

Insurers must ensure they collect enough premium to cover potential losses while remaining competitive. One of the most important methods is maintaining a good spread of risk—diversifying exposures across different geographical areas, classes of business, and types of insureds. This spreads the impact of losses, reducing the chance that a single catastrophic event or concentration of similar risks will threaten the insurer’s financial stability.

Option B, specialization, increases dependence on a narrow market segment and may elevate risk volatility. Option C is unrealistic because insurers cannot rely solely on “superior risks,” nor can they guarantee such a selection. Option D—concentrating business in one location—is dangerous because natural disasters, economic downturns, or localized events could cause severe aggregated losses.

Thus, insurers most effectively manage loss volatility through A: a good spread of risk.