Question

Why would an insurer transfer a portion of its risk to a reinsurer?

a.

To protect its balance sheet in the event of a major loss

b.

To increase its liability in case of a major loss

c.

To decrease its liability in case of a minor loss

d.

To earn a higher commission on the insurance sale

Posted under IC22 Life Insurance Underwriting

Answer: (a).To protect its balance sheet in the event of a major loss Explanation:The insurer transfers a portion of its risk to a reinsurer to protect its balance sheet in the event of a major loss that it may not have the capacity to cope with.

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Q. Why would an insurer transfer a portion of its risk to a reinsurer?
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