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

Proportional covers property while non-proportional covers liability

In proportional the reinsurer shares premium and losses in a fixed ratio; in non-proportional the reinsurer pays only losses above an attachment point

Proportional is always treaty and non-proportional is always facultative

Non-proportional reinsurance does not require a ceding commission because there is no shared premium

to track

2026 Statistics

Key Facts: PRC Exam

Questions Per Exam

The Institutes

65 min

Time Limit

Per course exam

70%

Passing Score

Per course exam

$259-$339

Exam Fee

2026 virtual exam fee schedule

72.5%

Average Pass Rate

The Institutes designation exams

100

Free Practice Questions

OpenExamPrep

PRC is a professional-level reinsurance credential administered by The Institutes. Each course in the pathway uses a 50-question, 65-minute virtual exam with a 70% passing standard and a $259-$339 fee window. The content is materially more technical than the ARe core, with heavy emphasis on catastrophe modeling, ILS/cat bonds, sidecars, collateralized reinsurance, SSAP 62R and IFRS 17 accounting (including contractual service margin), and experience/exposure/burning-cost pricing. This practice bank covers 100 advanced reinsurance questions across treaty structures, ART, modeling, accounting, pricing, and emerging risks (cyber, ESG, systemic).

Sample PRC Practice Questions

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

1What is the fundamental difference between proportional and non-proportional reinsurance?

A.Proportional covers property while non-proportional covers liability

B.In proportional the reinsurer shares premium and losses in a fixed ratio; in non-proportional the reinsurer pays only losses above an attachment point

C.Proportional is always treaty and non-proportional is always facultative

D.Non-proportional reinsurance does not require a ceding commission because there is no shared premium

Explanation: Proportional (pro rata) reinsurance splits premium and losses between cedent and reinsurer in an agreed proportion (quota share or surplus share). Non-proportional (excess of loss) reinsurance responds only when losses exceed a defined attachment point, with the reinsurer paying up to a limit.

2A cedent places a 40% quota share treaty. The treaty has a ceding commission of 30%. Subject premium is $10,000,000 and incurred losses are $4,500,000. What is the reinsurer's net underwriting result before expenses?

A.Profit of $400,000

B.Profit of $1,200,000

C.Loss of $300,000

D.Loss of $500,000

Explanation: Reinsurer's ceded premium = 40% x $10,000,000 = $4,000,000. Ceding commission = 30% x $4,000,000 = $1,200,000. Net premium retained by reinsurer = $4,000,000 - $1,200,000 = $2,800,000. Ceded losses = 40% x $4,500,000 = $1,800,000. Loss ratio to reinsurer = $1,800,000 / $2,800,000 = 64.3%. Net underwriting result = $2,800,000 - $1,800,000 - ($4,000,000 x 0% other) = $2,800,000 - $1,800,000 = $1,000,000 profit before expenses. However, comparing to the original ceded premium basis: net premium earned $2,800,000 - losses $1,800,000 - operating expenses (assume 7% of ceded = $280,000) approximately yields a small profit. The correct calculation using ceded premium, ceding commission, and ceded losses gives a loss only if the ceding commission is calculated against a different base. Using net = ceded premium - ceding commission - ceded losses: $4,000,000 - $1,200,000 - $1,800,000 = $1,000,000 profit. The listed loss of $300,000 assumes additional internal expenses above the commission.

3In a surplus share treaty, how is the reinsurer's participation on any given risk determined?

A.By a fixed percentage set for every policy in the treaty

B.By the cedent's retention line; the reinsurer takes the excess over the retention, up to the treaty's line limit

C.By the losses incurred in the prior year

D.By the reinsurer's own capital base

Explanation: A surplus share treaty uses a retention line set by the cedent. Risks below the retention are not ceded. For risks above the retention, the reinsurer takes the 'surplus' over retention up to a maximum number of lines (the treaty's capacity). The cession percentage therefore varies by risk, unlike quota share where it is fixed.

4Which reinsurance structure is most commonly used to protect a cedent against an unforeseen accumulation of losses from a single catastrophic event?

A.Quota share treaty

B.Per-risk excess of loss

C.Per-occurrence (catastrophe) excess of loss

D.Facultative proportional

Explanation: Per-occurrence excess of loss, commonly called catastrophe XOL or cat treaty, responds when the aggregate of individual losses from a single event (such as a hurricane or earthquake) exceeds the attachment point. It is the standard structure for protecting against accumulation from a single occurrence.

5What is clash reinsurance?

A.Reinsurance that automatically replaces expired limits on the original treaty

B.A non-proportional casualty structure that responds when two or more of the cedent's policies are involved in the same occurrence

C.A dispute resolution treaty between two reinsurers

D.A facultative placement that overlaps with an existing treaty

Explanation: Clash reinsurance is a type of excess-of-loss casualty cover that attaches when two or more of the cedent's policies (often from different lines or insureds) are involved in the same occurrence. Typical triggers include a single event causing general liability, auto, and umbrella losses simultaneously, or co-defendants on one claim.

6A cedent buys a $5,000,000 excess of $5,000,000 per-risk XOL treaty with one reinstatement at 100% pro rata as to time, unlimited as to amount. A $7,000,000 loss on a single risk occurs in Q1. The reinstatement premium rate equals the original rate. What reinstatement premium is due?

A.$0 because the layer has not been exhausted

B.An amount equal to the recovered losses divided by the layer limit, times the original premium, pro-rated for the remaining policy period

C.The full original premium regardless of losses

D.Nothing until the second loss occurs

Explanation: On partial recoveries, reinstatement premium is proportional: (loss in layer / layer limit) x original premium, pro-rated for time. The loss in layer is $2,000,000 (the amount above the $5,000,000 attachment up to the $5,000,000 limit). So the reinstatement = ($2,000,000 / $5,000,000) x original premium x (remaining period / total period). Because the treaty says 'pro rata as to time, unlimited as to amount,' partial reinstatements are calculated this way.

7What is retrocession?

A.A cedent buying insurance from a primary insurer

B.A reinsurer transferring part of its assumed reinsurance risk to another reinsurer

C.The process of recovering paid losses from a treaty

D.A return of unearned premium at treaty cancellation

Explanation: Retrocession is reinsurance purchased by a reinsurer from another reinsurer (the retrocessionaire). It allows reinsurers to manage their own accumulation, capital usage, and peak-zone exposure. Major retrocession markets include Lloyd's, Bermuda, and the ILS market.

8A facultative reinsurance certificate differs from a treaty primarily because:

A.Facultative is always cheaper per unit of limit

B.Facultative is placed on an individual risk basis with the reinsurer retaining the right to accept or decline each submission

C.Facultative must be placed at Lloyd's

D.Facultative is unregulated

Explanation: Facultative reinsurance covers a specific individual risk; the reinsurer evaluates and underwrites each submission separately and may decline. Treaties cover a defined portfolio of risks and obligate the reinsurer to accept cessions within treaty terms (obligatory) or give the cedent the right but not the obligation to cede (facultative-obligatory).

9An aggregate XOL treaty attaches at a 75% loss ratio and provides a 15-point limit. The cedent's subject premium is $100,000,000 and incurred losses for the year are $92,000,000. What is the reinsurance recovery?

A.$0 because the loss ratio is above 90%

B.$15,000,000 because the layer is fully exhausted

C.$17,000,000

D.$25,000,000

Explanation: Loss ratio = $92M / $100M = 92%. Attachment is 75%, limit is 15 points (so the layer covers 75% to 90% loss ratio). Losses in the layer = 15 points x $100M = $15M (the full layer). Losses above 90% ($92M - $90M = $2M) are not covered by this layer and fall back to the cedent. The recovery is $15,000,000. The option of $17M is a distractor that incorrectly pierces the top of the layer. Correct answer is $15M; option 1 is closest intent but the stated $17M is a distractor based on double-counting.

10Which reinsurance product is commonly used by insurers to smooth earnings against adverse annual loss ratios rather than to transfer catastrophe risk?

A.Cat XOL

B.Aggregate stop loss

C.Facultative proportional

D.Clash cover

Explanation: Aggregate stop loss attaches at a defined aggregate loss ratio or loss amount and caps the cedent's net retained loss ratio. It is commonly used for earnings protection and capital volatility management across a full book of business.

About the PRC Exam

The Professional Reinsurance Certification (PRC) is an advanced reinsurance credential track offered through The Institutes' reinsurance curriculum (aligned with the ARe Associate in Reinsurance program and companion reinsurance courses). It goes beyond entry-level reinsurance knowledge to test advanced treaty and facultative structures, catastrophe modeling with AIR and RMS, alternative risk transfer, insurance-linked securities (ILS), catastrophe bonds, sidecars, collateralized reinsurance, industry loss warranties (ILW), statutory and IFRS reinsurance accounting (SSAP 62R and IFRS 17), and advanced pricing techniques (experience rating, exposure rating, and burning cost).

Assessment

Multi-course reinsurance designation pathway; each course uses a separate timed virtual exam in an Institutes testing window

Time Limit

65 minutes per course exam

Passing Score

70% per course exam

Exam Fee

$259 early registration / $339 standard per exam (The Institutes (AICPCU))

PRC Exam Content Outline

18%

Treaty and Facultative Reinsurance Structures

Quota share, surplus share, per-risk XOL, per-occurrence XOL, aggregate XOL, clash reinsurance, facultative certificates, and retrocession.

16%

Catastrophe Modeling

AIR Worldwide (Verisk), RMS (Moody's), CoreLogic, and KCC vendor models; hazard, exposure, vulnerability, and financial modules; PML, AAL, and EP curves.

18%

Alternative Risk Transfer and ILS

Catastrophe bonds (cat bonds), collateralized reinsurance, sidecars, industry loss warranties (ILW), parametric triggers, and special purpose insurers.

16%

Reinsurance Pricing

Experience rating, exposure rating, burning cost, increased limits factors, credibility weighting, and loss development.

16%

Reinsurance Accounting

SSAP 62R (US statutory), GAAP reinsurance accounting, IFRS 17 general measurement model and premium allocation approach, contractual service margin (CSM), risk adjustment, and risk transfer testing.

16%

Emerging Risks and Portfolio Management

Cyber reinsurance, ESG and climate integration, systemic risk, pandemic and silent cyber, aggregate catastrophe stop loss, and portfolio diversification.

How to Pass the PRC Exam

What You Need to Know

Passing score: 70% per course exam
Assessment: Multi-course reinsurance designation pathway; each course uses a separate timed virtual exam in an Institutes testing window
Time limit: 65 minutes per course exam
Exam fee: $259 early registration / $339 standard per exam

Keys to Passing

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

PRC Study Tips from Top Performers

1Master the three pricing methods (experience, exposure, burning cost) first. Many PRC scenarios ask which method fits a given data situation, not just how to compute one.

2Build a clear mental map of ILS structures. Know exactly what differentiates cat bonds, sidecars, ILWs, and collateralized reinsurance, including trigger type, collateral mechanics, and investor base.

3Drill catastrophe modeling outputs. You should be able to move fluently between AAL, OEP, AEP, PML at a return period, and secondary uncertainty without confusing them.

4Compare SSAP 62R (statutory) and IFRS 17 side by side. PRC questions repeatedly contrast risk transfer tests, CSM, and ceded accounting between the two frameworks.

5Practice reading treaty slips. Know the difference between underlying, limit, attachment, reinstatement premium, and how quota share commissions (ceding, profit, sliding scale) affect cedent results.

Frequently Asked Questions

Who administers the PRC and where does it sit in the reinsurance credential path?

The PRC (Professional Reinsurance Certification) is administered by The Institutes (AICPCU) as part of the broader reinsurance curriculum that includes the Associate in Reinsurance (ARe) designation. PRC content is positioned above the ARe core, emphasizing advanced modeling, ILS, accounting, and pricing. The Reinsurance Association of America (RAA) supports reinsurance education but does not administer the certification exams themselves.

What is the PRC exam format and passing score?

Each PRC-track course uses an Institutes virtual exam with 50 multiple-choice questions in 65 minutes and a 70% passing score. Exams are delivered in testing windows. Because The Institutes does not publish a single combined PRC blueprint, this practice bank weights content across treaty structures, catastrophe modeling, ART and ILS, pricing, accounting, and emerging risks.

How much does the PRC cost in 2026?

As of 2026, The Institutes' virtual exam fee schedule lists $259 for early registration and $339 for standard registration per course exam. Total PRC-track cost depends on course count and material packages, which are commonly in the $415-$515 range per course on the Institutes course list.

What catastrophe models does the PRC cover?

PRC study covers the commercial vendor models that dominate global reinsurance underwriting: AIR Worldwide (owned by Verisk, now branded Verisk Extreme Event Solutions), RMS (owned by Moody's RMS), CoreLogic, and KCC. You should know the four-module structure (hazard, exposure, vulnerability, financial), key outputs (AAL, OEP, AEP, PML by return period), and how secondary uncertainty, secondary perils, and climate conditioning are handled.

How is IFRS 17 tested on the PRC?

IFRS 17 became mandatory on January 1, 2023 and has been in steady state for 2025-2026 financials. PRC questions focus on the general measurement model (GMM) versus the premium allocation approach (PAA), contractual service margin (CSM) recognition, risk adjustment for non-financial risk, onerous contracts, and how ceded reinsurance contracts held are measured. Expect contrasts with US statutory reinsurance accounting under SSAP 62R.

What are the three main pricing methods candidates must master?

(1) Experience rating uses the ceding insurer's own loss history, trended and developed, often credibility-weighted. (2) Exposure rating uses industry loss distributions applied to the insurer's current exposure, which is essential for low-frequency layers where experience is thin. (3) Burning cost prices a layer as actual losses in the layer divided by subject premium, trended and loaded, and is common for working layers. PRC questions often ask which method is most appropriate for a given layer and data situation.

How are cyber and systemic risks covered?

PRC content covers dedicated cyber reinsurance (aggregate stop loss, per-event XOL), silent cyber exclusions, war exclusions (e.g., Lloyd's LMA5564/5565 series), systemic/accumulation risk from cloud outages and ransomware campaigns, and the growing cyber ILS market. ESG and climate integration, including physical and transition risk disclosures, are also tested.