Question

What is the purpose of reinsurance?

a.

To increase the liability of the direct insurer.

b.

To reduce the liability of the direct insurer.

c.

To increase the risk exposure of the direct insurer.

d.

To share the profits of the direct insurer.

Posted under IC22 Life Insurance Underwriting

Answer: (b).To reduce the liability of the direct insurer. Explanation:Reinsurance helps to reduce the liability of the direct insurer to a large extent, and helps in sharing and spreading of risks.

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