Question

In what circumstances should an insurer increase their retention to preserve the acceptable degree of fluctuation of results?

a.

In times of bad results

b.

In times of good results

c.

When there is no inflation

d.

When there is economic inflation

Posted under IC85 Reinsurance Management

Answer: (d).When there is economic inflation Explanation:To preserve the calculated acceptable degree of fluctuation of results an increase in retention exactly equivalent to the economic inflation is called for. Failing this the insurer’s retention is effectively falling back. Inflation also tends to cause higher claims without compensatory increase in sums insured.

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Q. In what circumstances should an insurer increase their retention to preserve the acceptable degree of fluctuation of results?
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