To an insurer, the advantages of reinsurance include all but one of the following:
A) directly increasing profits,
B) stabilizing profits,
C) reducing unearned premium reserve requirements,
D) enabling an insurer to retire from underwriting a given segment of its business,
E) enlarging financial capacity to accept risk.

Question

Quizplus · Accepted Answer

Reinsurance does not directly increase profits; it is primarily used to manage risk, stabilize profits, reduce reserve requirements, exit certain lines of business, and increase capacity to underwrite more risk. Directly increasing profits is more a result of effective overall business operations rather than the specific use of reinsurance.

To an Insurer, the Advantages of Reinsurance Include All but One