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AFSB 153 Sample Exam
All of the following are cash-handling procedures floor tellers can use to reduce loss, EXCEPT: a. Locking the cash drawer when they leave the counter b. Counting cash out of sight of customers c. Having direct access to the vault cash d. Using a reserve cash drawer with a separate lock and key - ✔️ ✔️ c. Having direct access to the vault cash
All of the following are categories of public official bonds that relate to the officeholder's responsibility, EXCEPT: a. Officials who do not handle money, including administrative officers b. Peace-keeping officers and other public safety officers c. Professional fundraisers who collect money for public works d. Money-handling public officials - ✔️ ✔️ c. Professional fundraisers who collect money for public works
A provision of income tax bonds that makes them particularly hazardous for sureties to write is the a. Surety forfeits the bond penalty even if the taxpayer makes a partial payment. b. Surety's inability to cancel the bond. c. Long-tail nature of the bond liability. d. Right of third parties to file lawsuits against the surety. - ✔️ ✔️ b. Surety's inability to cancel the bond.
A ratio that measures a financial institution's ability to absorb losses is its a. Capital ratio. b. Nonperforming ratio. c. Liquidity ratio. d. Asset quality ratio. - ✔️ ✔️ a. Capital ratio.
A seller is required to give written notice of a claim on a Packers and Stockyards Act bond. What is the effect if the seller fails to give written notice to the packer and the Secretary of Agriculture within thirty days of the missed payment due date? a. If a bankruptcy ensues or the princpal fails to pay, the livestock seller receives payment only after the other creditors. b. If the livestock seller's claim against the trust is denied, it loses its right to file a claim against the bond. c. If a banktruptcy ensues or the principal fails to pay, the livestock seller loses its right to file a claim against the trust. d. If the trust fund does not adequately cover the livestock seller's claim, it loses its right to file a claim against the bond. - ✔️ ✔️ c. If a banktruptcy ensues or the principal fails to pay, the livestock seller loses its right to file a claim against the trust.
A surety would use an indemnity agreement rather than a bond application when a. The underwriter is concerned that the surety faces a greater-than-average risk of loss. b. Several subsidiaries of a corporation require a number of bonds. c. A producer with power of attorney and underwriting authority executes a bond. d. The surety reuqires signed indmenity agreements for all bonds. - ✔️ ✔️ b. Several subsidiaries of a corporation require a number of bonds.
A surety's general guarantee under a court bond is a. To prevent obstruction of justice in civil and criminal proceedings. b. To ensure that the government will be reimbursed for all expenses related to legal proceedings and operation of the court system. c. To ensure that principals will fulfill their obligations as prescribed by law or a court or to show financial responsibility for the benefit of another. d. All of the above - ✔️ ✔️ c. To ensure that principals will fulfill their obligations as prescribed by law or a court or to show financial responsibility for the benefit of another.
A management procedure that can be used to prevent computer fraud is a. Regularly monitoring salary administration and employee satisfaction. b. Training backup personnel for year-end procedures. c. Designating a single person to have access to and control over the computer systems. d. Removing terminated persons from the work area within a day. - ✔️ ✔️ a. Regularly monitoring salary administration and employee satisfaction.
A party that functions as in intermediary who arranges the shipment of goods by motor carrier for interstate or foreign commerce is a(n) a. Transportation broker. b. Independent auctioneer. c. Bureau of Land Management agent. d. Federal warehouseman. - ✔️ ✔️ a. Transportation broker.
A perimeter protection device that is effective for protecting openings such as air-duct passages and skylights that provide paths for intruders is a. Lacing (paneling). b. Contacts. c. Wooden screens. d. Metallic foil. - ✔️ ✔️ c. Wooden screens.
After an insurer pays a claim under a crime policy, the policyholder's right of recovery from third parties passes to the insurer through assignment or a. Litigation. b. Formation. c. Subrogation. d. Rescission. - ✔️ ✔️ c. Subrogation.
c. Continuous term d. Revolving term - ✔️ ✔️ d. Revolving term
All of the following are strip mining bond provisions, EXCEPT: a. Specification of a method of extraction b. Procedures and provisions for bond forfeiture, release, or discharge c. Enforcement remedies specified by law, including forfeiture procedure d. Public notification of a reclamation plan - ✔️ ✔️ d. Public notification of a reclamation plan
All of the following are the insured's duties after loss, EXCEPT: a. Notify the insurer b. Submit to examination under oath c. Produce all pertinent records d. Take action to recover loss, whever possible - ✔️ ✔️ d. Take action to recover loss, whever possible
All of the following are the insured's duties in the event of loss, EXCEPT: a. Notify the police of any loss as soon as possible. b. Submit to examination under oath at the insurer's request. c. Give the insurer a detailed, sworn proof of loss within 120 days. d. Cooperate with the insurer in the investigation and settlement of any claim. - ✔️ ✔️ a. Notify the police of any loss as soon as possible.
All of the following are undesirable features the underwriter looks for in an individual public official bond form, EXCEPT: a. Depository failure liability b. Third-party direct right of action c. Cumulative liability d. Right of termination - ✔️ ✔️ d. Right of termination
All of the following describe how the underwriter should treat coverage for money and securities stored in a fire-resistive but not burglar-resistant safe, EXCEPT: a. Limit overnight storage in the safe to petty cash. b. Limit the insurer's liability for a loss that occurs when the business is closed. c. Accept the risk with no restrictions. d. Price the coverage as if no safe existed. - ✔️ ✔️ c. Accept the risk with no restrictions.
All of the following ratios are liquidity ratios, EXCEPT: a. Loans-to-deposits ratio b. Securities-to-assets ratio c. Loan-loss-reserve-to-nonperforming-assets ratio d. Large-deposits-and-borrowing-to-deposits ratio - ✔️ ✔️ c. Loan-loss-reserve-to- nonperforming-assets ratio
An employee takes her company's laptop computer on a business trip, and the computer is stolen. Which one of the following insuring agreements would provide coverage for this loss? a. Employee Theft b. Inside the Premises-Robbery or Safe Burglary of Other Property Coverage c. Outside the Premises d. Computer Fraud - ✔️ ✔️ c. Outside the Premises
An underwriter can verify a public official bond applicant's integrity and background by a. Examining the official's education and experience. b. Examining the financial statements and credit references for demonstrated financial responsibility and positive net worth. c. Reviewing records of the official's job performance in a related job or business over an extended time period. d. All of the above - ✔️ ✔️ d. All of the above
An underwriter determines the surety's ability to cancel a bond and the period of subsequent liability by a. Reviewing the bond form and the applicable laws. b. Reading the SAA documentation for that particular class of bonds. c. Studying court decisions in similar bond cases. d. None of the above determines the surety's ability to cancel or the liaiblity period. - ✔️ ✔️ a. Reviewing the bond form and the applicable laws.
An underwriter's primary tool for evaluating crime and financial institution risks is the a. Questionnaire. b. Financial report. c. Information provided by agents and brokers. d. Application. - ✔️ ✔️ d. Application.
An underwriting concern that applies to executor bonds is that a. Executors do not have the official appointment from the courts to properly administer the deceased's estate. b. Authority prescribed in the will might give the executor powers and duties that administrators do not have and that could create underwriting problems. c. Executors are not allowed to request representation from lawyers in administering the estate. d. States do not require that executors file executor bonds, so sureties face increased risk of adverse selection. - ✔️ ✔️ b. Authority prescribed in the will might give the executor powers and duties that administrators do not have and that could create underwriting problems.
Cash is taken during a burglary. The burglar did not leave marks of forcible entry or exit. Which one of the following ISO commercial crime coverages would provide coverage for this theft? a. Employee Theft
d. None of the above - ✔️ ✔️ a. To promote investment in shipping by shipowners and operators
If an insured fails to comply with this crime condition, he or she could be deprived of coverage for an otherwise covered loss. This provision is the a. Deductible condition. b. Settlement condition. c. Records condition. d. Joint insured condition. - ✔️ ✔️ c. Records condition.
In addition to assisting bond applicants to complete applications and indemnity agreements, some surety producers a. Investigate commercial surety bond losses. b. Design commercial surety bond forms. c. Have underwriting authority to execute bonds. d. Investigate applicants' credit reports, financial statements, and loss experience. - ✔️ ✔️ c. Have underwriting authority to execute bonds
In addition to banks and savings and loan associations, all of the following financial institutions have separate financial institution bond forms, EXCEPT: a. Credit unions b. Stock exchanges c. Mortgage brokers d. Insurance companies - ✔️ ✔️ b. Stock exchanges
In addition to the amount of the expected loss and investigative expenses, claim representatives should consider the following when setting reserves on commercial surety bond losses: a. Legislative loss reserve requirements. b. Producer commissions. c. Obligee's financial worth. d. Payment of interest. - ✔️ ✔️ d. Payment of interest.
In loss sustained employee dishonesty insurance, discovery occurs when the insured first becomes a. Suspicious that a covered loss has occurred. b. Aware of facts that would cause a reasonable person to assume that a covered loss has occurred. c. Aware of facts that would cause a reasonable person to suspect that a covered loss has occurred. d. Suspicious that a covered loss will occur. - ✔️ ✔️ b. Aware of facts that would cause a reasonable person to assume that a covered loss has occurred.
In states that have adopted the UPC, fiduciaries are required to furnish fiduciary bonds only when a will requires one, a special fiduciary is appointed, or a. Municipal laws require one.
b. The heirs reside in other states that have not adopted the UPC. c. No creditors have claimed an interest in the estate assets. d. A third party with a financial interest in the estate requests a bond. - ✔️ ✔️ d. A third party with a financial interest in the estate requests a bond.
Insurance premium guarantee bonds are used when a. Self-insured individuals choose not to purchase insurance. b. Utility companies require a guarantee for payment for utilities consumed. c. Large companies purchase insurance that defers premium payments. d. Pension plans must protect their assets when employees withdraw from the plan. - ✔️ ✔️ c. Large companies purchase insurance that defers premium payments.
One difference between the insuring agreements in Form 14 and Form 24 is that Form 24 a. Includes partners in the definition of "employees." b. Eliminates coverage for all trading losses. c. Provides coverage for fewer types of securities. d. Provides that telegraphic instructions sent by an imposter are not considered forgery.
- ✔️ ✔️ b. Eliminates coverage for all trading losses.
Packers and Stockyards Act bonds are designed to protect a. Livestock sellers. b. The public. c. Packers and stockyard operations. d. State governments. - ✔️ ✔️ a. Livestock sellers.
Parties that are likely to obtain condemnation bonds include a. Private developers and building contractors. b. Railroads, telephone companies, and other public utilities. c. Executors and administrators. d. Conglomerate financial and investment corporations. - ✔️ ✔️ b. Railroads, telephone companies, and other public utilities.
Parties that might require miscellaneous bonds include the federal government, states, counties, municipalities, political subdivisions, or political bodies, and a. Federal district courts and state and county courts. b. State and county probate courts. c. Persons, firms, corporations, associations, or other legal entities. d. None of the above - ✔️ ✔️ c. Persons, firms, corporations, associations, or other legal entities.
Premium discounts are available for inside the premises coverage for all of the following, EXCEPT: a. An approved alarm system b. Security guards on premises when the business is closed c. Business open twenty-four hours per day
d. Full disclosure of loss information is optional. - ✔️ ✔️ c. Loss experience can be used to predict future losses.
The choice between the loss sustained form and the discovery form is significant to employee theft coverage because employee theft losses are typically a. Not covered by the Records condition. b. Not covered by the Extended Period to Discover Loss condition. c. Discovered immediately or soon after they occur. d. Discovered months or years after they occur. - ✔️ ✔️ d. Discovered months or years after they occur.
The definition of employee dishonesty in the SAA Crime Protection Policy would include all of the following, EXCEPT: a. A dishonest act b. Manifest intent c. An identified employee d. Financial benefit - ✔️ ✔️ c. An identified employee
The discovery form would cover all losses that are a. Sustained b. Sustained during the policy period. c. Discovered during the policy period. d. Discovered after the policy period expires. - ✔️ ✔️ c. Discovered during the policy period.
The first step in the claim process is notice of loss. The second step is a. Investigation. b. Settlement. c. Evaluation. d. Coverage verification. - ✔️ ✔️ d. Coverage verification.
The ISO commercial crime forms and policies consider all of the following as theft, EXCEPT: a. Robbery b. Inventory shortages c. Safe burglary d. Computer fraud - ✔️ ✔️ b. Inventory shortages
The primary function of an alarm system is a. To prevent a burglar from entering the premises. b. To indicate when an intruder has entered the premises. c. To protect employees from harm during a robbery. d. To protect valuable commodities from theft. - ✔️ ✔️ b. To indicate when an intruder has entered the premises.
The relationship between the principal and surety on schedule bonds differs from that relationship on individual bonds because a. The principals on individual bonds must indemnify the surety in the event of a bond loss, while principals on schedule bonds are not required to indemnify the surety. b. The principals on a schedule bond do not sign the bond form, so they do not personally enter into the contract, even though they are bonded. c. The protection provided by the schedule bond of a public official's subordinates increases the liability assumed under the individual public official's bond. d. All of the above - ✔️ ✔️ b. The principals on a schedule bond do not sign the bond form, so they do not personally enter into the contract, even though they are bonded.
The surety relationship includes all of the following parties, EXCEPT: a. Surety b. Fiduciary c. Obligee d. Principal - ✔️ ✔️ b. Fiduciary
What is necessary and sufficient for employee theft or dishonesty coverage to apply to a loss? a. An employee commits a dishonest act. b. A policyholder incurs a fidelity loss. c. A policyholder has an inventory loss and an employee commits a dishonest act. d. A policyholder demonstrates that a loss is the direct result of an employee's dishonest act. - ✔️ ✔️ d. A policyholder demonstrates that a loss is the direct result of an employee's dishonest act.
When a fiduciary illegally procures assets for the benefit of the estate or for which he or she is responsible, the surety a. Must pay any claims related to those assets but is entitled to indemnification from the principal. b. Is not liable for any losses related to those assets. c. Must pay any claims related to those assets but can press charges against the fiduciary for the fraudulent behavior. d. Must forfeit the bond penalty if a loss occurs related to those assets. - ✔️ ✔️ b. Is not liable for any losses related to those assets.
When evaluating a contractor's business for a contractors indemnity bond, a surety would be likely to write the bond in prudent amounts if the applicant has a. Posted full security for the bond. b. Liaibility insurance that would pay third-party damages. c. A history of no third-party damages under other construction bonds. d. None of the above - ✔️ ✔️ b. Liaibility insurance that would pay third-party damages.
Which one of the following claim issues applies to federal official bonds?
c. Some states require that tobacco distributor bonds provide indemnity to third parties that are injured as a result of tobacco sales. d. Tobacco tax bonds often contain onerous forfeiture provisions. - ✔️ ✔️ c. Some states require that tobacco distributor bonds provide indemnity to third parties that are injured as a result of tobacco sales.
Which one of the following is most beneficial to producers of retail services and professional license bonds? a. Personal experience in the business or profession to be bonded b. Local knowledge of the area, the key people (reputations and successes or failures), and the true values of the business property c. A college degree in business, with emphasis in the business or profession to be bonded d. None of the above - ✔️ ✔️ b. Local knowledge of the area, the key people (reputations and successes or failures), and the true values of the business property
Which one of the following SAA classifications of license and permit bonds do sureties consider the most hazardous? a. Compliance bond with third-party liability b. Reclamation and environmental protection bonds c. Forfeiture bonds d. Merchandising and dealer bonds - ✔️ ✔️ b. Reclamation and environmental protection bonds
Which one of the following should an insurer use to inform the policyholder that its investigation has provided facts that could affect the policyholder's claim? a. Acknowledgment of loss letter b. Coverage verification letter c. Reservation of rights letter d. Right of rescission letter - ✔️ ✔️ c. Reservation of rights letter
Which one of the following statements is true concerning depository guidelines? a. If the government establishes depository guidelines, the surety must deposit funds according to those guidelines for the payment of future bond losses. b. Depository guidelines dictate the minimum deposit that a principal can make into an account on any given day. c. A bank establishes depository guidelines for public officials to ensure that the officials do not abuse their money-handling privileges. d. If the principal does not follow depository guidelines and the bank in which the principal deposited funds fails, the surety is liable. - ✔️ ✔️ d. If the principal does not follow depository guidelines and the bank in which the principal deposited funds fails, the surety is liable.
Which one of the following types of information would the human resources department generally be able to provide to the underwriter? a. Applicant's educational background
b. Applicant's performance evaluation c. Employer's surveillance video d. Employer's customer complaints about employee - ✔️ ✔️ a. Applicant's educational background
Which one of the following would be the most effective question for the claim representative to ask the policyholder concerning an employee theft or dishonesty loss? a. Have you filed criminal charges? b. Has the employee been arrested? c. Where were the criminal charges filed? d. What, if any, criminal charges have been filed against the employee, and where were they filed? - ✔️ ✔️ d. What, if any, criminal charges have been filed against the employee, and where were they filed?
Which one of the following would require manifest intent? a. Employee theft form b. Employee dishonesty form c. Computer fraud insuring agreement d. Outside the Premises insuring agreement - ✔️ ✔️ b. Employee dishonesty form
When might a court interpret bond language to include lawyers' fees that exceed the bond penalty when combined with other damages (excess awards)? a. Courts routinely allow lawyers' fees as excess awards when bond cases are tried. b. Bond language prohibits courts from ever allowing excess awards. c. Courts often allow lawyers' fees as excess awards in bond claims presented by damaged third parties. d. Courts sometimes allow excess awards to punish a surety for bad faith or unfair claim settlement practices. - ✔️ ✔️ d. Courts sometimes allow excess awards to punish a surety for bad faith or unfair claim settlement practices.
When should an underwriter require collateral for license and permit bonds? a. When the underwriter is certain that the principal will default on the bond obligation b. After the principal has defaulted on the bond obligation c. When the principal presents a higher-than-average risk of default on the bond obligation d. When the principal fails to meet all underwriting requirements - ✔️ ✔️ c. When the principal presents a higher-than-average risk of default on the bond obligation
