Every answer and its explanation appears here once you have finished the path. Each one then links to the matching glossary entry, where the concept is set out in full with its worked example.
1. In the worked case, the 40 million layer above 10 is exhausted in February, reinstated once, and the year brings two more events. How much does the cedant retain in October, on a 30 million loss?
28 million: 10 of priority plus 18 unprotected, the layer having only 2 million of limit left
In February the layer pays its 40 million and is exhausted; in June, reinstated, it pays 38, leaving only 2 million of limit and no reinstatement. In October, on 30 million, it therefore pays only that 2: the cedant retains 10 plus 18, that is 28 million, more than in February where the loss was 55. That is the result the module wants you to feel, and it appears only by following the layer across the whole year. Answering 30 forgets the 2 million that remain and must be claimed; answering 10 assumes a layer still intact.
Glossary entry →2. The reinstatement in the case is pro rata to amount and pro rata to time. What does prorata temporis change according to whether the event occurs in February or November?
In February it costs close to a full premium, with ten months left, and in November almost nothing: it is priced by the calendar
Prorata temporis charges for the exposure period still to run, not for the use already made of the layer. An early event therefore triggers a near-full expense, immediately, at the worst moment for cash, just after a mass loss. The answer calling it cheaper in February inverts the mechanism by reasoning about wear, as one would for a rented asset. And cyber adds its own harshness: it has no season, so a layer exhausted early leaves uniform exposure to year end, with no window closing as a hurricane season would.
Glossary entry →3. The underwriting committee had concluded the program covered two large events. In what way did that sentence, which is true, mislead it?
It answered a severity question, whereas the year asked a frequency question
It is because the sentence is accurate that it is hard to challenge in the room, and that is what makes it a trap rather than an error. The program was tested on a two-large-event trajectory, and the year brought three, medium ones. The limit answers the size of an event, the reinstatement answers how many times, and on a peril whose frequency is rising the second decides the year. The answer pointing to the priority is right about one thing, the retention repeats at every event, but the priority is a known, budgeted amount whereas exhaustion removes the protection itself.
Glossary entry →4. The module links reinstatement to the aggregation window. What would have happened if the cedant had split February into two events to recover the 5 million lost above the layer?
It would have consumed its reinstatement in February, and June as well as October would have fallen entirely on it
A second event consumes a second layer, therefore a second reinstatement, and there was only one. The optimization that gains fifteen million in March can cost forty in September, and that is the reminder that the right objective is not recovery on this loss but recovery on the year. The answer speaking of losing the benefit of the layer entirely overstates the other way: the layer would indeed have responded to those two February events, only nothing would have been left afterwards. A program is therefore not read line by line, it is walked through as trajectories.
Glossary entry →5. Which form of protection answers a frequency question rather than a severity question?
Stop-loss, which looks at the year's total incurred rather than each event taken apart
Stop-loss triggers when a period's total incurred passes a threshold, almost always expressed as a percentage of premium: it ignores the size of each loss and looks only at the year's result. Per-event excess does exactly the opposite, which is why it lets a multitude of moderate losses through. The aggregation clause is the best distractor here because it does group claims: but it groups them to form one event within the treaty's meaning, which remains a severity logic, and not to sum the year.
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