Catastrophic losses are not insured by the private insurance industry because:
A) if a truly catastrophic loss occurs, it can threaten the solvency of the insurer
B) catastrophic losses can result from an individual's moral hazard
C) the federal government wants to insure catastrophic losses
D) the losses require foreign reinsurance companies to operate in the U.S.

Question

Quizplus · Accepted Answer

Catastrophic losses have the potential to be so large that they can threaten the solvency of the insurer, which is why they are not typically insured by the private insurance industry.

Catastrophic Losses Are Not Insured by the Private Insurance Industry