Insurance Awareness - Reinsurance
Which of the following statements about reinsurance is TRUE?
Which of the following statements about reinsurance is TRUE?
medium Q7 of 15
Step-by-Step Solution
Step 1: Analyze each statement
Reinsurance eliminates all risks for the ceding company is false because reinsurance reduces but does not eliminate risk. Reinsurance helps insurers increase their underwriting capacity is true as reinsurance allows insurers to underwrite more policies by sharing risk. Reinsurance is mandatory for all insurance policies in India is false; reinsurance is not mandatory for all policies. Reinsurance is provided only by government agencies is false; reinsurance is provided by both government and private entities.Final Answer:
Reinsurance helps insurers increase their underwriting capacity → Option AQuick Check:
Reinsurance supports insurers to take on more risk but does not eliminate risk entirely.
Quick Trick: Reinsurance expands insurer's capacity.
Common Mistakes:
MISTAKES- Assuming reinsurance removes all risk or is mandatory for all policies.
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