Surplus Lines Practice Test & Exam Prep

Why does a life insurer purchase reinsurance?

To transfer part of its accepted risk to another insurer To cancel all policyholder obligations To avoid maintaining underwriting standards To replace the need for claims administration

Correct Answer:

To transfer part of its accepted risk to another insurer

Explanation:

Reinsurance allows the primary insurer to transfer a defined portion of risk to a reinsurer. It can support capacity, stabilize results, and protect against unusually large exposures.

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