Question

What is the purpose of reinsurance in insurance business?

a.

To increase premium rates for direct business

b.

To provide financial stability to insurers

c.

To limit the insurer's commitment from all underwriting lines

d.

To control the insurer's expense ratio

Posted under IC85 Reinsurance Management

Answer: (b).To provide financial stability to insurers Explanation:Reinsurance provides financial stability to insurers by paying the reinsured portion of the loss in case of large losses that may endanger the insurer's financial stability.

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