Question

What is the objective of risk transfer?

a.

To minimize the total cost of capital needed to deal with a risk

b.

To avoid any potential risks

c.

To maximize profits through equity capital

d.

To invest in various assets for risk diversification

Posted under IC85 Reinsurance Management

Answer: (a).To minimize the total cost of capital needed to deal with a risk Explanation:The objective of risk transfer is to enable a customer to minimize the total cost of capital needed to deal with a risk. By reinsuring the risk, the customer can reduce the amount of capital required to cover potential losses. This approach can be more advantageous than relying solely on equity capital, especially for large corporates and insurers.

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