Question

What is the purpose of securitization in the insurance market?

a.

To transfer risks to external parties through reinsurance contracts.

b.

To provide comprehensive coverage for all types of risks.

c.

To enhance regulatory compliance for insurance companies.

d.

To convert insurance risks into tradable securities.

Answer: (d).To convert insurance risks into tradable securities. Explanation:Securitization is an attempt to get over capacity constraints in the insurance market for natural catastrophes by securitizing catastrophe risk portfolios and placing them directly with investors in the form of securities.

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Q. What is the purpose of securitization in the insurance market?

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