Question

The primary objective of reinsurance is that it should reduce the insurer’s probability of ‘ruin’ at a price acceptable to it . In what context is the word ‘ruin’ used by an actuary?

a.

Loss

b.

Bankruptcy

c.

Deficit

d.

Debit

Posted under IC85 Reinsurance Management

Answer: (b).Bankruptcy Explanation:In actuarial science, the term 'ruin' is used to describe the state of financial insolvency or bankruptcy for an insurance company. It refers to a situation where an insurer's losses exceed its available capital and reserves, leading to the inability to pay claims and obligations to policyholders. The primary objective of reinsurance is to reduce the probability of such ruin by transferring some of the risk to other insurance companies, at a price that is acceptable to the ceding insurer.

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Q. The primary objective of reinsurance is that it should reduce the insurer’s probability of ‘ruin’ at a price acceptable to it . In what context is the word ‘ruin’ used by an...
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