INS 313 – ANSWER KEY

Development and Pecuniary of Property Insurance

1. ETYMOLOGY & DEFINITION OF INSURANCE

1. Insurance can be traced to the ___ century Anglo-Norman word.

➤ 15th

2. The Anglo-Norman word from which insurance is derived is ___.

➤ enseur

3. 'En' means ___ and 'seur' means ___.

➤ En = To make / Seur = Sure

4. Insurance means at least ___ things.

➤ three (3)

5. In a Transfer System, the party called the insured transfers the uncertainty of financial loss to
the party called the ___.

➤ Insurer

6. An insurance policy is not a contract itself but evidence of the existence of an ___.

➤ insurance contract

7. An insurer is an insurance company for life, non-life, or ___.

➤ composite

8. An insured is a person, business, or organization whose property, lives, or legal liability is

covered by an ___.

➤ insurance policy

2. CLASSIFICATION OF INSURANCE – NIIRA 2025

1. NIIRA 2025 was enacted in ___.

➤ August 2025

2. NIIRA 2025 repealed the Insurance Act ___.

➤ 2003

3. Section ___ of NIIRA 2025 groups insurance into 2 categories.

➤ Section 3

4. The two categories are Non-Life with ___ classes and Life with ___ classes.
 ➤ 8 non-life classes / 4 life classes

5. The 8 classes of non-life insurance include: Fire, General, Motor Vehicle, Marine & Aviation,
Agricultural, Energy, ___ and ___.

➤ Engineering / Bonds; Credit Guarantee and Suretyship

6. The 4 classes of life insurance include: Individual Life Assurance, Group Life Insurance,
Annuity, and ___.

➤ Health Insurance Business

3. GREAT FIRE OF LONDON & EARLY FIRE INSURANCE

1. ___ was the year of the Great Fire of London.

➤ 1666

2. The Great Fire of London destroyed more than ___ houses.

➤ 13,000

3. The Great Fire destroyed ___ churches.

➤ 87

4. The Great Fire rendered over ___ people homeless.

➤ 100,000

5. The Great Fire changed insurance from a matter of convenience into a matter of ___.

➤ urgency

6. Prior to the Great Fire, marine insurance helped merchants protect cargoes and ships from the
risk of piracy and ___.

➤ storms

7. In ___, just 14 years after the fire, Nicholas Burbon founded the first fire insurance company in
England.

➤ 1680

8. Nicholas Burbon was a ___ by profession.

➤ dentist

9. The first fire insurance company founded by Nicholas Burbon is known as the ___.

➤ Fire Office

10. The Fire Office was located near the ___.

➤ Royal Exchange
 11. The Fire Office initially offered fire policies within a ___ mile radius of London.

➤ 1 (one)

12. The Hand in Hand Fire and Life Insurance Society was established in ___ at Tom's Coffee
House.

➤ 1696

13. The Hand in Hand Society was set up as a ___ society.

➤ mutual

14. The Sun Fire Office was founded in ___ by ___.

➤ 1710 / Charles Povey

15. Today, the Sun Fire Office is part of ___.

➤ Royal Sun Alliance Group

16. Each insured house was fitted with a metal badge called a ___ for easy identification by
firemen.

➤ fire mark

4. EFFECTS OF THE INDUSTRIAL REVOLUTION

1. The Manchester Steam Users Association was formed in ___.

➤ 1854

2. Members of the Manchester Steam Users Association used the services of ___ inspectors.

➤ steam boilers

3. In ___ certain members founded the first Engineering Insurance Company.

➤ 1858

4. The first Engineering Insurance Company was called ___.

➤ Steam Boilers Assurance Company

5. Engine / Machinery Breakdown Insurance began in ___.

➤ 1872

5. PECUNIARY / BUSINESS INTERRUPTION INSURANCE (HISTORY)

1. The company that introduced consequential loss insurance in 1797 was ___.

➤ Minerva Universal
 2. Chomage Insurance was introduced by ___ France.

➤ Alsace

3. Chomage Insurance covered a loss arising out of labour stoppage or ___.

➤ unemployment

4. Chomage Insurance provided a fixed indemnity of ___% of the asset value.

➤ 10%

5. Following the accounting standards of ___, many insurers started granting cover for business
interruption.

➤ 1854

6. Many early Chomage insurers failed because claims were based on a fixed percentage and
not the true ___.

➤ financial loss of the business owners

7. In 1899, the actuary and insurance broker who crafted consequential fire loss indemnity was
___.

➤ Ludovic Maclellan Mann

8. The UK model of business interruption insurance first policy was placed in London on January
1st, ___.

➤ 1939

9. ___ was the person who, like Mann, also developed business interruption insurance.

➤ Cuthbert Heath

6. THE INSURANCE MARKET

1. The insurance market refers to the various mechanisms through which ___ come together to
transact insurance business.

➤ buyers, sellers and intermediaries

2. It is ___ necessary that insurance buyers and sellers meet physically.

➤ not

3. Insurance buyers are also called the 'policy owners' or the ___.

➤ insured

4. Insurance sellers are also known as insurance providers or ___.

➤ underwriters
 5. The two types of insurance sellers are ___ and ___.

➤ Direct / Indirect

6. The regulator of insurance in Nigeria is ___.

➤ NAICOM (Nigerian Council of Insurance and Actuaries)

7. Other participants in the market include Actuaries, Investors, Arbitrators, Surveyors, Lawyers,
and ___.

➤ Loss Adjusters

7. TYPES OF INSURANCE COMPANIES

1. Proprietary companies are also known as ___ companies.

➤ Stock

2. In Nigeria, companies must be registered under ___ and licensed by NAICOM.

➤ CAMA (Companies and Allied Matters Act)

3. The minimum share capital for a Life Insurance Company in Nigeria is ■___.

➤ ■10 Billion Naira

4. The minimum share capital for a Non-Life Insurance Company in Nigeria is ■___.

➤ ■10 Billion Naira

5. Currently there are ___ life insurance companies and ___ non-life insurance companies in
Nigeria.

➤ 14 life / 29 non-life

6. Mutual companies are no longer popular because they have become ___.

➤ proprietary companies

7. Specialist companies that specialise only on oil and gas are called ___.

➤ International Energy Insurers

8. Takaful insurance companies incorporate some elements of ___.

➤ Sharia law

9. Micro Insurance companies provide insurance for individuals and organizations with ___
income.

➤ low

10. Captive insurance companies are set up to underwrite insurance business of the ___.

➤ parent company / owner

 11. Tariff companies were originally owned by ___ Bank.

➤ First Bank (originally owned by Sanlam Now)

12. The organization that regulates premium rates, policy wording, and code of ethics is the ___.

➤ Nigerian Insurers Association (NIA)

8. DEFINITION OF FIRE INSURANCE

1. According to the Cambridge Dictionary, fire insurance pays for damage caused by ___.

➤ fire

2. In the UK, fire insurance is listed under Section ___ of the insurance business.

➤ Section 23(C)

3. In India, fire insurance is defined under the Insurance Act ___.

➤ 1938

4. The Association of British Insurers (CABIT) defines fire insurance as a contract up to an

agreed ___.

➤ amount

5. Merriam-Webster dictionary defines fire as 'the phenomenon of combustion manifested in ___

flames and heat'.

➤ light

6. The vital elements of fire according to the definition are combustion, light, flames, and ___.

➤ heat

9. MEANING OF FIRE IN FIRE INSURANCE – CASE LAW

1. For a fire loss to be recoverable, the fire must be ___, i.e. accidental.

➤ fortuitous

2. In addition to being fortuitous, there must be actual ___.

➤ ignition

3. Justice Boyles ruled in Everest v. London Association Company ___ that fire means the
production of light and heat by ___.

➤ 1885 / combustion

4. In Everest v. London Association Company (1885), the court held that the fire was ___ for the
loss.
 ➤ NOT responsible (the fire did not escape and no part of insured property was
actually ignited)

5. In Talamon v. Home C.M. Insurance Company, the court ruled in favour of the ___ holding that
damage during removal of goods from imminent fire is a direct loss by fire.

➤ insured

6. In Ermenbout v. Girard Fire & Marine Insurance Co. (1895), the fire weakened the mill's wall
causing it to ___ onto the insured's building.

➤ collapse / fall

7. In Ermenbout, the court ruled that the fire in the adjacent building was the ___ cause of the
loss.

➤ proximate

8. In Russel v. German Fire Insurance Company (1907), the court ruled that the fire was the ___
cause.

➤ proximate

9. In Stanley v. Western Insurance Company (1868), the policy contained an exclusion clause
exempting the insurer from damage caused by ___.

➤ explosion

10. In Stanley, the court ruled in favour of the ___ because the explosion exclusion clause was
expressly excluded by the policy.

➤ insurer

11. In Levy v. Bailey (1831), during a fire the insured's goods were stolen. The court ruled this
theft was a loss ___ caused by fire.

➤ proximately

12. In Harris v. Poland (1941), Mrs Harris hid her ___ and bank notes inside the fireplace.

➤ jewellery

13. In Harris v. Poland, the court ruled in favour of the ___ holding that the policy covers
accidental loss caused by fire.

➤ insured

14. Smoke alone, without a hostile fire, is ___ considered loss by fire.

➤ NOT

10. FEATURES OF FIRE INSURANCE POLICIES

1. Fire insurance is an ___ contract.
 ➤ indemnity

2. Fire insurance is a contract in which the insured receives the ___ amount of the loss from the
insurers.

➤ exact

3. The principle that the insured must disclose all material facts is called ___.

➤ utmost good faith

4. A fire insurance policy is usually issued for ___ calendar months with an option to renew.

➤ 12

5. If the damaged property is insured with more than one insurer, all insurers contribute ___ for
the loss.

➤ ratably

6. The insurer is not liable for payment if the fire is caused ___.

➤ deliberately

7. A fire insurance policy can be assigned only with prior approval of the ___.

➤ insurer

8. In the event of a fire, a prompt ___ must be given to the insurer.

➤ notification

11. RECOVERABLE / NON-RECOVERABLE LOSSES UNDER FIRE POLICY

1. Any loss resulting from bona fide efforts to put out a fire is ___.

➤ recoverable

2. Theft of the insured's property removed from a burning building to a safe place is ___ under a
fire policy.

➤ recoverable

3. Articles thrown out of windows to avoid damage by fire is a ___ loss.

➤ recoverable / direct

4. Property damaged while being removed from a burning building is ___ under a fire policy.

➤ recoverable

5. Damage to a neighbour's house by explosion done for the purpose of ___ the fire is
recoverable.

➤ extinguishing
 6. Loss by theft during a fire (Levy v. Bailey 1831) is ___.

➤ recoverable

7. Loss by fire caused by the insured's negligence (Harris v. Poland 1941) is ___.

➤ recoverable

8. Smoke alone, without a hostile fire, is ___ considered a loss by fire.

➤ NOT

12. HAZARDS IN FIRE INSURANCE

1. The two main types of hazards in fire insurance are ___ hazards and ___ hazards.

➤ Physical / Moral

2. Physical hazards are ___ aspects of a property.

➤ tangible

3. The three sub-types of physical hazards are inception hazard, ___ hazard, and ___ hazard.

➤ propagation / moral

4. Inception hazard refers to factors that can ___ fire.

➤ start / cause

5. Propagation hazard refers to factors that facilitate the ___ and spreading of fire once started.

➤ development

6. Moral Hazard relates to the ___ characteristics of the insured.

➤ intangible

7. Moral Hazard involves intangible characteristics such as carelessness, disobedience, ___ and
attitudes.

➤ neglect

8. Morale Hazard is a situation where the property owner behaves in a ___ manner that can lead
to more hazardous conditions.

➤ risky

9. A building used for dwelling has ___ inception risk compared to a warehouse.

➤ lower / relatively non-hazardous

10. The number and type of machines in a building is a fire measure because machines can
create conditions for a ___ hazard.

➤ fire / inception
 11. Where fire risk accumulates in direct proportion to the number of machines, this is a ___
hazard.

➤ propagation

13. LOCATION OF BUILDING AS A HAZARD

1. Location of building poses varying degrees of both ___ hazard and ___ hazard.

➤ inception / propagation

2. In a congested area, a fire starting from one property can easily ___ to adjoining properties.

➤ spread

3. In a congested area, fire fighting becomes difficult because access to the scene will be ___.

➤ limited

4. A location in a remote area means the fire may go ___ for hours.

➤ undetected

5. Country side locations have little or insufficient ___ supply.

➤ water

6. Country side locations have limited access to ___.

➤ fire brigade

7. Country side locations have presence of grass or bush fire, particularly in ___.

➤ dry season

8. Buildings scattered with enough road networks are in a ___ area.

➤ scattered / isolated

14. THEFT INSURANCE (January 12th, 2026)

1. Appropriation means to take something intentionally or ___.

➤ mistakenly

2. Robbery involves a thief with ___ putting me in fear.

➤ force

3. Burglary is when a person enters into another's compound and commits burglary when he has
___.

➤ trespassed
 4. Theft insurance is applicable when there is entry or exit by ___ means.

➤ forcible / violent

5. The UK Theft Act ___ defines theft.

➤ 1955

6. Dishonestly: Taking of another person's property with the belief that ___.

➤ it belongs to you / you have a right to it

7. A Theft insurance policy considers: Trade Designation, Availability of Anti-Theft devices, Moral
Standard of the insured, ___ of the risk, and Insurance history.

➤ Location

15. BONDS INSURANCE

1. A Bid Bond is a guarantee that the ___ will sign the contract at the bid price.

➤ bidder

2. A Performance Bond guarantees that the ___ will complete the project.

➤ contractor

3. A Completed Project Bond will eventually turn into the ___ as security for the loan.

➤ lender / bank

4. A Protective Bond guarantees that the ___ will complete the contract work or pay the owner for
his loss.

➤ contractor / surety

5. A Fiduciary Bond is required by a ___.

➤ court

6. Bonds used to manage and administer property of a person who has passed away are called
___ and ___ Bond.

➤ Bankruptcy / Administration (Liquidation)

16. FIDELITY BOND vs SURETY BOND

1. Fidelity bond protects the ___ against dishonesty or fraud by the employee.

➤ employer

2. Fidelity bonds are purchased by the ___ for the benefit of the ___.

➤ employer / obligee
 3. Surety bonds are purchased by the ___ for the benefit of the ___.

➤ obligor (employee) / obligee

4. The risk covered by Fidelity bond is infidelity, dishonesty, or ___.

➤ fraud

5. The risk covered by Surety bond is incompetence or ___.

➤ non-performance

6. In Surety bond, the insurer (Surety) does not really expect a ___.

➤ loss

7. In Surety bond, collateral is ___ required.

➤ NOT

8. The three types of Fidelity Bond are: ___ Bond, ___ Bond, and ___ Bond.

➤ Individual / Schedule / Blanket

9. An Individual Bond covers a ___ individual.

➤ named / specific

10. A Schedule Bond covers many employees. Types are: Named and ___.

➤ Positional

11. A Blanket Bond covers all employees. Types are: Commercial Blanket and ___.

➤ Blanket Position

17. UNDERWRITING PROCESS FOR FIDELITY BONDS

1. The proposal form for fidelity bonds is called the ___ Form.

➤ Employer

2. The employee being insured also fills the ___ Form.

➤ Employee (Referee)

3. The insurer will request for previous ___ Form.

➤ Employers

4. The premium rate for fidelity bonds is: ___% per occurrence x 0.1%.

➤ 5%

5. Premium formula: Per Capital Limit x Number of Staff x ___.

➤ Rate (5% x 0.1%)

 6. Using 960 staff at ■10,000,000 per capital limit at 5% x 0.1%, the total premium = ■___.

➤ ■480,000 (■10,000,000 x 960 x 5% x 0.1% = ■480,000)

18. TYPES OF SURETY BONDS

1. A Construction Bond assures the obligee that the obligor will provide compensation in case of
___.

➤ failure

2. A Court Bond is required by a ___.

➤ court

3. A Government Bond covers License and Permit, Customs and Excise, and ___.

➤ Public Officials

4. A Miscellaneous Surety Bond covers ___ Litigation.

➤ Fiduciary

19. INSURANCE AND SURETYSHIP (February 3rd, 2026)

1. Suretyship means protection or cover against loss through stealing, dishonesty, action or
inaction by individuals who are ___.

➤ trusted

2. The three parties in suretyship are: ___, Obligor, and ___.

➤ Trustee (Employee) / Obligee

3. The Obligee is the party to whom the ___ is owed.

➤ obligation

4. Personal Suretyship is when a person is asked to ___.

➤ get a guarantor

5. In insurance there are ___ parties. In suretyship there are ___ parties.

➤2/3

6. Insurance generally entails a ___ provision. In suretyship there is no such provision.

➤ cancellation

7. What is covered in an insurance policy is ___ the control of individuals. In suretyship it is within
the control of individuals.

➤ outside
 8. In suretyship there is a right of ___ between the surety and the obligor.

➤ indemnity

9. In insurance, subrogation exists but only after ___.

➤ indemnity is paid

10. In suretyship, the surety ___ has rights of subrogation against the debtor.

➤ automatically

20. BUSINESS INTERRUPTION INSURANCE (February 11th, 2026)

1. Business Interruption Insurance aims to replace ___ or profit lost if interruption happens.

➤ lost income

2. Turnover is a measure of the ___ of a business.

➤ activity

3. Gross Profit = Standing Charges + ___.

➤ Net Profit

4. Net Profit is the figure arrived when all costs of running the business are deducted from the
___.

➤ turnover

5. Variable Charges are expenses or costs that ___ in proportion to the volume of business
operations.

➤ vary

6. Standing Charges are charges that will continue to be incurred even if the business ___.

➤ stops / is interrupted

7. Standard Turnover is the turnover achieved during the ___ months immediately before the
date of the accident.

➤ 12

8. The insurer will pay for lost income up to ___ months following the damage.

➤ 12

20b. DETERMINING SUM INSURED – THREE METHODS

1. The three methods of determining Sum Insured are: Addition Method, ___ Method, and ___.

➤ Difference / Gross Sum

 2. Addition Method: GP = Net Profit + ___.

➤ Standing Charges

3. Difference Method: GP = ___ Profit - Variable Charges.

➤ Gross (Turnover - Variable Charges)

4. Gross Sum: GP = Standing Charges + ___.

➤ Net Profit

5. Specified Working Expenses means ___% of purchases.

➤ 100%

20c. SAMPLE CALCULATION – ASISA LIMITED

1. ASISA Limited: Opening Stock ■80,000; Sales ■300,000; Purchases ■160,000; Closing
Stock ■40,000; Selling Expenses ■55,000. Gross Profit = ■___.

➤ ■105,000 [Sales ■300,000 - (OS ■80,000 + Purchases ■160,000 - CS ■40,000) - SE

■55,000 = ■300,000 - ■195,000 = ■105,000]

2. If variable charges are ■235,000, Standing/Fixed Charges = ■___.

➤ ■55,000

20d. CONSEQUENTIAL LOSS RATING FACTORS

1. The three Consequential Loss Rating Factors are: Physical Risk, ___ Period, and ___ Risk.

➤ Indemnity / Interruption

2. Physical Risk considers factors consequent upon material damage which are far greater than
the ___.

➤ material damage loss itself

3. Interruption Risk refers to things that can ___ the process.

➤ interrupt

— END OF ANSWER KEY —