AFSB 153 Sample Exam The surety relationship includes all of the following parties, EXCEPT: a. Surety b. Fiduciary c. Obligee d. Principal - ✔✔b. Fiduciary All of the following are recognized bond terms, EXCEPT: a. Noncancelable (open term) b. Definite term c. Continuous term d. Revolving term - ✔✔d. Revolving term 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 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. 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. 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. 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
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