1. __________ happens when insurers are uncertain about the true expected losses of insureds.
a. Subrogation
b. none of the answers is correct.
c. Parameter uncertainty
d. An indemnity contract
e. Concealment
2. Which of the following statement is correct?
a. Cat bonds are also known as "catastrophe-linked bonds."
b. A typical HO-3 type of homeowners’ insurance policy never provides coverage for “other structures” of a house based on the percentage of the dwelling such as it is stated as “10 percent of dwelling coverage.”
c. All the answers are incorrect.
d. Since the losses tend not to be correlated across policyholders, homeowners’ insurance policies commonly include coverage for earthquake and flood.
e. Contingent equity is issued by the investment banks and the insurance firms that pre-commit to purchase new common stock from an investment bank at agreed upon prices if a certain contingency occurs, such as an earthquake.