Question

Which type of retention is managed through reasonable estimation of financial consequences and by allowing a catastrophe reserve for funds to accumulate and be available over the long term?

a.

Per risk retention

b.

Per event retention

c.

Financial retention

d.

Capital retention

Posted under IC85 Reinsurance Management

Answer: (b).Per event retention Explanation:Per event retention is managed through reasonable estimation of financial consequences and through causing a catastrophe reserve for funds to accumulate and be available over the long term. This type of retention is used to manage losses resulting from a catastrophic event, such as a natural disaster. It helps ensure that the insurer has sufficient funds to pay out claims resulting from such an event. In contrast, per risk retention is the retention amount set for each individual risk, which can be managed through controlled and informed decisions. Financial retention and capital retention are not commonly used industry terms.

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