Reinsurance is defined as:

Reinsurance is defined as:

• A. A Contract Where One Insurer Transfers All or Part of a Risk to Another
• B. A Policy That Covers Only Life Insurance
• C. A Method of Setting Premiums Based on Age
• D. A Regulatory Requirement for Diversification

Answer: (A)

Reinsurance involves one insurer transferring all or part of a risk to another insurer under a contract. This arrangement allows the primary insurer to spread exposure, protect solvency, and write more business than its capital would otherwise permit. The reinsurer takes on a portion of the potential losses and in return receives a share of the premium, while the original insurer retains some risk and continues to manage the policies and claims for the ceded portion. Reinsurance can be arranged for individual risks (facultative) or for broader blocks of business under a treaty. This description fits because reinsurance is about transferring risk between insurers, not about a consumer policy or pricing based on age, and it isn’t a regulatory requirement for diversification.

Reinsurance involves one insurer transferring all or part of a risk to another insurer under a contract. This arrangement allows the primary insurer to spread exposure, protect solvency, and write more business than its capital would otherwise permit. The reinsurer takes on a portion of the potential losses and in return receives a share of the premium, while the original insurer retains some risk and continues to manage the policies and claims for the ceded portion. Reinsurance can be arranged for individual risks (facultative) or for broader blocks of business under a treaty.

This description fits because reinsurance is about transferring risk between insurers, not about a consumer policy or pricing based on age, and it isn’t a regulatory requirement for diversification.