Question

What is the purpose of commission earned by the insurer in a reinsurance transaction?

a.

To compensate for business development and acquisition costs

b.

To increase the amount of risk transferred to the reinsurer

c.

To decrease the amount of risk retained by the insurer

d.

To increase the premium charged to the policyholder

Posted under IC22 Life Insurance Underwriting

Answer: (a).To compensate for business development and acquisition costs Explanation:The commission earned by the insurer in a reinsurance transaction compensates for its business development and acquisition costs associated with the transfer of risk to the reinsurer.

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Q. What is the purpose of commission earned by the insurer in a reinsurance transaction?
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