Question

Why do insurers use reinsurance?

a.

To refuse business they can't handle

b.

To reduce their liability in unforseen events

c.

To earn commission for passing on the business

d.

To transfer risk from the policyholder to the insurer

Posted under IC22 Life Insurance Underwriting

Answer: (b).To reduce their liability in unforseen events Explanation:Insurers use reinsurance to protect their balance sheet and reduce their liability in unforseen events by transferring part of the risk to the reinsurer.

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