100+ Free ARe Practice Questions

Pass your Associate in Reinsurance (ARe) exam on the first try — instant access, no signup required.

✓ No registration✓ No credit card✓ No hidden fees✓ Start practicing immediately

Not publicly reported Pass Rate

100+ Questions

100% Free

1 / 100

Question 1

Score: 0/0

In reinsurance terminology, what is the insurance company that transfers risk to a reinsurer called?

Retrocessionaire

Cedant (ceding company)

Reinsurer

Broker of record

to track

2026 Statistics

Key Facts: ARe Exam

Questions Per Exam

The Institutes

70%

Passing Score

The Institutes

65 min

Exam Time

The Institutes

4 courses

Program Length

Plus free ethics module

9-12 mo

Typical Completion

The Institutes

$415-515

Per Course Cost

The Institutes

The ARe (Associate in Reinsurance) designation requires passing four course exams (ARe 320, ARe 321, ARe 322, CPCU 520) plus a free ethics module through The Institutes. Each exam has 50 questions in 65 minutes with a 70% passing score. The program covers serving the reinsurance customer (25%), exploring reinsurance products and transactions (30%), developing and executing treaty reinsurance contracts (30%), and cross-functional insurance operations via CPCU 520 (15%). Total program cost is typically $1,660-$2,060.

Sample ARe Practice Questions

Try these sample questions to test your ARe exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1In reinsurance terminology, what is the insurance company that transfers risk to a reinsurer called?

A.Retrocessionaire

B.Cedant (ceding company)

C.Reinsurer

D.Broker of record

Explanation: The cedant (also called the ceding company or primary insurer) is the insurer that transfers — or cedes — part of its risk to a reinsurer. The reinsurer is the party assuming the risk, and a retrocessionaire is a reinsurer's reinsurer.

2Which term describes reinsurance purchased by a reinsurer to protect its own exposure?

A.Facultative treaty

B.Retrocession

C.Stop loss

D.Quota share

Explanation: Retrocession is reinsurance purchased by a reinsurer to cede part of its assumed risk to another reinsurer (the retrocessionaire). It is how reinsurers themselves manage concentration and catastrophe exposure.

3Which is NOT one of the principal functions of reinsurance for a ceding insurer?

A.Increase large-line capacity

B.Stabilize loss experience

C.Provide catastrophe protection

D.Guarantee underwriting profit

Explanation: Reinsurance does not guarantee an underwriting profit for the cedant. Its principal functions are increasing large-line capacity, stabilizing loss experience, providing catastrophe protection, providing surplus relief, and facilitating withdrawal from a market segment.

4A quota share treaty under which the cedant retains 30% and cedes 70% will split a $200,000 loss how?

A.Cedant $140,000; reinsurer $60,000

B.Cedant $60,000; reinsurer $140,000

C.Cedant $100,000; reinsurer $100,000

D.Cedant $0; reinsurer $200,000

Explanation: Quota share splits every loss by the same fixed percentage as premium. With a 30% retention and 70% cession, the cedant pays 30% of $200,000 = $60,000 and the reinsurer pays 70% = $140,000.

5Which reinsurance form covers a single policy or risk and is negotiated individually between cedant and reinsurer?

A.Treaty reinsurance

B.Facultative reinsurance

C.Pooling agreement

D.Finite reinsurance

Explanation: Facultative reinsurance is negotiated for a single policy or risk. The reinsurer has the 'faculty' to accept or decline each submission. Treaty reinsurance, by contrast, covers a portfolio or class of policies under an automatic contract.

6In a surplus share treaty, the cedant keeps a 'line' of $500,000 and the treaty provides nine lines. What is the maximum ceded amount on a $4,000,000 policy?

A.$500,000

B.$3,500,000

C.$4,000,000

D.$4,500,000

Explanation: With a $500,000 retention (one line) and nine additional lines, treaty capacity is 9 × $500,000 = $4,500,000. On a $4,000,000 policy the cedant keeps $500,000 and cedes the remaining $3,500,000. Premium and losses are split in the same 12.5%/87.5% ratio that the retention bears to the total insured value.

7Which statement best distinguishes quota share from surplus share reinsurance?

A.Quota share cedes a fixed percentage of every risk; surplus share cedes only the amount exceeding the cedant's retained line

B.Quota share is non-proportional; surplus share is proportional

C.Surplus share uses a fixed percentage on every risk; quota share varies by risk

D.Surplus share is always facultative; quota share is always treaty

Explanation: Quota share cedes the same fixed percentage on every risk covered by the treaty. Surplus share cedes only the portion of each risk that exceeds the cedant's retained line — so the cession percentage varies with each policy's size.

8Ceding commission paid by a reinsurer to a cedant under a proportional treaty is primarily intended to:

A.Reward the cedant for low loss ratios

B.Reimburse the cedant for acquisition costs, taxes, and overhead on the ceded premium

C.Compensate the reinsurer for assumed risk

D.Fund the reinsurer's catastrophe reserves

Explanation: Ceding commission reimburses the cedant for commissions paid to producers, premium taxes, and a share of underwriting/overhead expenses — costs the cedant incurred to originate the business. It is a core feature of pro rata treaties.

9Under a sliding scale commission, as the cedant's loss ratio on the treaty decreases, the ceding commission typically:

A.Decreases

B.Increases

C.Stays the same

D.Becomes negative

Explanation: A sliding scale commission rewards better loss experience. As the loss ratio falls, the ceding commission percentage rises (within contract minimums and maximums). Conversely, as losses rise, commission falls. It aligns incentives between cedant and reinsurer.

10Profit commission (contingent commission) on a proportional treaty is:

A.A guaranteed minimum commission regardless of results

B.An additional commission paid to the cedant only when the treaty produces an underwriting profit above a defined margin

C.A penalty the cedant pays the reinsurer for adverse loss experience

D.Commission paid upfront in addition to ceding commission

Explanation: Profit commission is an additional payment to the cedant, computed after a loss-carry-forward and after the reinsurer retains a defined profit margin and expense allowance. It rewards cedants whose treaties produce underwriting profit.

About the ARe Exam

The Associate in Reinsurance (ARe) designation from The Institutes validates expertise in reinsurance products, transactions, and treaty contracts. The program consists of three ARe core courses (320, 321, 322) plus CPCU 520 and a free ethics module. Each course concludes with a 50-question proctored virtual exam covering reinsurance needs analysis, proportional and non-proportional structures, treaty clauses, and claim handling.

Assessment

3 ARe core courses + CPCU 520 + free Ethics 311 module; each course ends with its own 50-question virtual proctored exam

Time Limit

65 minutes per course exam

Passing Score

70%

Exam Fee

$415-$515 per course (The Institutes (AICPCU))

ARe Exam Content Outline

25%

ARe 320: Serving the Reinsurance Customer

Analyzing a cedant's personal lines, commercial property, commercial liability, and specialty books; measuring the financial impact of reinsurance on capital, surplus, and risk-based capital ratios

30%

ARe 321: Exploring Reinsurance Products and Transactions

Treaty vs facultative placements; proportional structures (quota share, surplus share); non-proportional excess of loss (per risk, per occurrence, aggregate, stop loss); catastrophe covers, working covers, clash covers, and retrocession

30%

ARe 322: Developing and Executing Treaty Reinsurance Contracts

Fundamental and ancillary treaty clauses, offer slips, bordereaux, ceding commission and profit commission, sliding scale, reinstatement premium, claims handling, arbitration, and contract termination

15%

CPCU 520 + Ethics 311

Meeting challenges across insurance operations (marketing, underwriting, claims, risk control, premium audit) plus the free Ethical Decision Making in Risk & Insurance module

How to Pass the ARe Exam

What You Need to Know

Passing score: 70%
Assessment: 3 ARe core courses + CPCU 520 + free Ethics 311 module; each course ends with its own 50-question virtual proctored exam
Time limit: 65 minutes per course exam
Exam fee: $415-$515 per course

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

ARe Study Tips from Top Performers

1Memorize the split between cedant and reinsurer under quota share (fixed %) vs surplus share (lines above a retained line) — every exam tests these

2Master excess-of-loss mechanics: attachment point, limit, annual aggregate deductible, reinstatement premium, and hours clauses for catastrophe covers

3Know the fundamental treaty clauses cold — insolvency, follow the fortunes, follow the settlements, errors and omissions, arbitration, offset, and access to records

4Understand how reinsurance affects the cedant's surplus, premium-to-surplus ratio, and risk-based capital — CPCU 520 overlap

5Practice applying Solvency II collateral rules and NAIC Credit for Reinsurance Model Act requirements to alien vs certified vs reciprocal reinsurers

6Use the free Ethics 311 module as your lightest course — complete it early to remove a requirement

Frequently Asked Questions

What is the ARe designation and who administers it?

The Associate in Reinsurance (ARe) is a professional designation from The Institutes (AICPCU) that validates knowledge of reinsurance principles, products, transactions, and treaty contracts. It is earned by completing three core courses (ARe 320, 321, 322), CPCU 520, and a free Ethics 311 module, each with a 50-question proctored virtual exam scored at 70% to pass.

What is the difference between treaty and facultative reinsurance?

Treaty reinsurance is a contract covering a class or portfolio of policies, with the reinsurer obligated to accept all cessions that fall within the treaty terms. Facultative reinsurance is negotiated individually for a single risk or policy — the reinsurer can accept or decline each submission. Treaty is automatic and efficient for homogeneous books; facultative is used for unusual, large, or specialty risks.

What is the difference between proportional and non-proportional reinsurance?

Proportional (pro rata) reinsurance — quota share and surplus share — splits premium and losses in the same proportion between cedant and reinsurer, with ceding commission paid back to the insurer. Non-proportional (excess of loss) reinsurance has the reinsurer pay only when losses exceed a retention (attachment point); it includes per-risk XL, per-occurrence XL (catastrophe, clash), aggregate XL, and stop loss.

How much does the ARe program cost and how long does it take?

Each ARe course costs approximately $415-$515 depending on package, with early registration saving $80 per exam. Total program cost is typically $1,660-$2,060 for ARe 320, 321, 322 and CPCU 520 (Ethics 311 is free). Most candidates complete the designation in 9-12 months, studying 4-6 weeks per course with roughly 30 hours of study per course.

What is the ARe exam format?

Each ARe course ends with a 50-question virtual proctored exam delivered via Talview. You have 65 minutes per exam and need 70% or higher to pass. Questions are application-based and may include multiple choice, drag-and-drop, fill-in-the-blank, and numeric entry. One free retake is included within the same exam window.

What is ceding commission and profit commission?

Ceding commission is paid by the reinsurer to the ceding company on proportional treaties to reimburse acquisition costs (commissions, taxes, overhead). Profit commission (also called contingent commission) is an additional payment to the cedant when the treaty produces an underwriting profit above a specified margin. Sliding scale commission adjusts the ceding commission based on the loss ratio, rewarding lower losses.

What is a reinstatement premium in excess of loss reinsurance?

A reinstatement premium is an additional premium the cedant pays to restore the limit of a catastrophe or per-occurrence excess of loss cover after a loss has eroded or exhausted it. Reinstatements are usually expressed as a percentage of the original premium (e.g., '100% additional premium pro rata as to time') and define how many times the limit can be reinstated during the treaty period.