Question

How do reinsurance arrangements help small insurance companies compete with larger ones?

a.

By dissolving losses incurred by the direct insurer

b.

By transferring risks to the reinsurer

c.

By spreading their financial risks suitably to the reinsurers

d.

By accepting risks from another reinsurer

Posted under IC22 Life Insurance Underwriting

Answer: (c).By spreading their financial risks suitably to the reinsurers Explanation:In a competitive environment, insurers feel the need for insuring risks through the reinsurers, especially when large covers are involved. Reinsurance arrangements help small, upcoming insurance companies to compete with larger insurance companies by spreading their financial risks suitably to the reinsurers.

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Q. How do reinsurance arrangements help small insurance companies compete with larger ones?
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