Question

How does reinsurance contribute to cost reduction for insurers?

a.

By increasing capital requirements

b.

By incurring higher taxation

c.

By pricing risks at a lower cost

d.

By limiting risk assessment

Posted under IC 92 Actuarial Aspects of Product Development

Answer: (c).By pricing risks at a lower cost Explanation:Reinsurers may price risks at a lower cost than insurers due to various factors, including different capital requirements, diversification benefits, taxation, and risk assessment, leading to cost reduction for insurers.

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Q. How does reinsurance contribute to cost reduction for insurers?
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