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Reinsurance Quiz

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Questions and Answers

What is reinsurance?

Insurance purchased by individuals to protect themselves from major claims events

Insurance purchased by a company to protect itself from minor claims events

Insurance purchased by an insurance company from another insurance company to protect itself from major claims events (correct)

Insurance purchased by a government to protect itself from major claims events

What does the ceding company do in reinsurance?

Passes on some of its insurance liabilities to another insurance company (correct)

Retains all its insurance liabilities

Purchases insurance from another company

Sells insurance to the reinsurer

What is the role of reinsurance in risk management?

Is not related to risk management

Reduces the capital requirements for insurance companies

Increases the risk for insurance companies

Helps insurance companies remain solvent after major claims events (correct)

Who is referred to as the 'ceding company' in reinsurance?

<p>The company that purchases the reinsurance policy</p> Signup and view all the answers

What may reinsurers be in the context of reinsurance?

<p>Specialist reinsurance company or another insurance company</p> Signup and view all the answers

Study Notes

Reinsurance

Reinsurance is a type of insurance where an insurance company (ceding company) purchases insurance from another insurance company (reinsurer) to manage its own risk.
The ceding company transfers part of the risk it has assumed from its policyholders to the reinsurer.

Ceding Company

The ceding company is the insurance company that originates the insurance policy and cedes (transfers) part of the risk to the reinsurer.
The ceding company pays a premium to the reinsurer and, in return, the reinsurer agrees to pay a portion of the claims.

Role of Reinsurance in Risk Management

Reinsurance helps the ceding company to manage its risk exposure by transferring part of the risk to the reinsurer.
This allows the ceding company to reduce its financial liability and maintain its solvency.

Reinsurers

Reinsurers are insurance companies that provide reinsurance coverage to ceding companies.
Reinsurers may be traditional insurance companies, specialty reinsurers, or even capital market investors.

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Description

Test your knowledge of reinsurance with this quiz! Explore the concept of reinsurance, the roles of the ceding company and reinsurer, and how reinsurance helps manage risk in the insurance industry.