Alberta General Insurance Level 1 Practice Exam

What is underwriting authority?

1. The number of policies an insurer holds

2. The limit up to which underwriters can issue policies or bonds

3. A regulation for underwriting bonds

4. A permission granted to brokers to sell policies

The correct answer is: The limit up to which underwriters can issue policies or bonds

Underwriting authority is the limit or range up to which underwriters, who are responsible for evaluating and assuming financial risk, are allowed to issue policies or bonds. This option is correct because it directly defines and explains what underwriting authority means. The other options, although related to insurance and underwriting, do not accurately define underwriting authority. Option A refers to the actual number of policies held by an insurer, not the limit of authority for underwriters. Option C refers to a specific type of underwriting (bond underwriting), not the general concept of underwriting authority. Finally, option D refers to permissions granted to brokers, not underwriters, and involves selling policies rather than issuing them.