Question

The concept of balance in reinsurance refers to:

a.

The degree of acceptable fluctuation in a portfolio of risks

b.

The elimination of all fluctuation in a portfolio of risks

c.

The use of 100% reinsurance to finance all risks

d.

The need to retain all risks within the portfolio

Answer: (a).The degree of acceptable fluctuation in a portfolio of risks Explanation:Defines balance as the stability of a portfolio as it grows and in contrast to the relative volatility of a small portfolio. The aim is not to eliminate fluctuation but to determine the degree of acceptable fluctuation.

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