CRIS CRIS Risk Financing & Insurance Programs 1 — Questions and Answers
Question 1: What is an Owner-Controlled Insurance Program (OCIP) in construction?
- A policy purchased by the general contractor only
- A single insurance program procured by the owner covering all contractors on a project (Correct answer)
- A government-mandated insurance pool for public projects
- An insurance program controlled by subcontractors
Correct answer: A single insurance program procured by the owner covering all contractors on a project
An OCIP is a consolidated insurance program purchased and administered by the project owner to cover all enrolled contractors and subcontractors on a specific construction project.
Question 2: What distinguishes a Contractor-Controlled Insurance Program (CCIP) from an OCIP?
- The CCIP covers only the owner's property
- The CCIP is procured and administered by the general contractor rather than the owner (Correct answer)
- The CCIP excludes workers' compensation coverage
- The CCIP is mandatory on federally funded projects
Correct answer: The CCIP is procured and administered by the general contractor rather than the owner
In a CCIP, the general contractor—rather than the project owner—purchases and manages the wrap-up insurance program covering enrolled parties.
Question 3: A construction firm retains the first $500,000 of each loss and purchases excess coverage above that level. This arrangement is best described as:
- A captive insurance program
- A large deductible program (Correct answer)
- A retrospective rating plan
- An occurrence-based policy
Correct answer: A large deductible program
A large deductible program requires the insured to reimburse the insurer for losses up to a specified per-occurrence deductible, shifting primary loss financing to the insured.
Question 4: Which risk financing technique involves a group of construction firms forming their own insurance company to cover their collective risks?
- Retrospective rating plan
- Self-insured retention
- Group captive insurance (Correct answer)
- Assigned risk pool
Correct answer: Group captive insurance
A group captive is a formal insurance company owned and controlled by multiple unrelated firms that pool their risks to gain underwriting profits and investment income.
Question 5: Under a retrospective rating plan, the final premium is calculated based on:
- Industry average loss ratios only
- The insured's actual loss experience during the policy period (Correct answer)
- A fixed rate set at policy inception with no adjustments
- The insurer's investment returns
Correct answer: The insured's actual loss experience during the policy period
Retrospective rating adjusts the premium after the policy period ends using the insured's own losses, subject to minimum and maximum premium limits.
Question 6: A Risk Retention Group (RRG) differs from a standard commercial insurer primarily because:
- RRGs are prohibited from writing workers' compensation
- RRGs are owned by their members who share a common business classification (Correct answer)
- RRGs must be domiciled in all states where they write business
- RRGs can only insure residential construction projects
Correct answer: RRGs are owned by their members who share a common business classification
Under the Liability Risk Retention Act, an RRG is a member-owned liability insurer restricted to covering members engaged in similar businesses or activities.
CRIS CRIS Risk Financing & Insurance Programs 1
What is an Owner-Controlled Insurance Program (OCIP) in construction?