Question

What is the primary purpose of reinsurance?

a.

To increase the premiums collected by the reinsured

b.

To reduce the overall risk exposure of the reinsurer

c.

To exclude certain types of risks from insurance coverage

d.

To replace the need for direct insurance policies

Answer: (b).To reduce the overall risk exposure of the reinsurer Explanation:The primary purpose of reinsurance is to reduce the overall risk exposure of the reinsurer. By transferring a portion of their risk to a reinsurer, the original insurer (reinsured) can limit their potential losses and stabilize their financial position in the face of significant claims or catastrophic events. Reinsurance provides an additional layer of protection and spreads the risk across multiple insurers.

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Q. What is the primary purpose of reinsurance?

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