General Insurance PrinciplesQuestion 200 of 716
An insurance company purchases coverage from another insurance company to spread risk on very large policies. This arrangement is called:
a.Self-insurance
b.Surplus lines
c.Coinsurance
d.Reinsurance
Explanation
Reinsurance is insurance bought by an insurer (the ceding company) from another insurer (the reinsurer) to spread very large or volatile risks. Coinsurance is a loss-sharing clause inside a policy; self-insurance is retaining risk; surplus lines refers to placement of risk with a non-admitted insurer.
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