What of the following statements is true about risk assumption?
A)Retention is especially attractive to small organizations.
B)Many large corporations use captives, which are a form of reinsurance, to transfer their risk.
C)When a business creates a subsidiary to handle the risk exposures, the business creates a captive.
D)A captive firm is independent of its parent company.
E)When an organization uses a highly formalized method of retention of a risk, it is said the organization has reinsured the risk.

Question

Quizplus · Accepted Answer

When a business creates a subsidiary specifically to handle its risk exposures, this subsidiary is known as a captive insurance company. Captives are established as an alternative to traditional insurance, allowing businesses to have more control over their risk management and potentially save on insurance costs.

What of the Following Statements Is True About Risk Assumption