Which of the following statements about reinsurance is true?
A)A reinsurer may not purchase reinsurance.
B)The reinsurer is the first insurer that provides claims services to the insured after a loss occurs.
C)The amount of insurance transferred to a reinsurer is called the net retention.
D)The insurer transferring business to a reinsurer is called the ceding company.

Question

Quizplus · Accepted Answer

Reinsurance is a form of insurance that allows insurance companies to transfer a portion of their risk to other parties, known as reinsurers. The insurer transferring business to a reinsurer is called the ceding company. Therefore, statement D is true. Statement A is false because reinsurers do purchase reinsurance to limit their own exposure. Statement B is false because the primary insurer is the first to provide claims services to the insured after a loss occurs. Statement C is false because the amount of insurance retained by the insurer is called net retention; the amount of insurance transferred to a reinsurer is called cession.

Which of the Following Statements About Reinsurance Is True