12. A type of Insurance where one insurer transfers some or all loss exposures from policies written for its insureds to another insurer is known as
Answer: B
Reinsurance is a type of Insurance where one insurer transfers some or all loss exposures from policies written for its insureds to another insurer.
Reinsurance involves the practice of an insurance company transferring portions of its risk to another insurer, thus providing a safety net against large losses. This is essential for risk management within the insurance industry.
A) coinsurance.
Coinsurance refers to a cost-sharing agreement where the insured and insurer share the costs of a claim, typically expressed as a percentage. It does not involve transferring risk between insurers and thus is not applicable to the definition provided in the question.
B) reinsurance.
Reinsurance is accurately defined as the process by which one insurance company transfers risk to another. It serves to protect insurers from significant losses and is a crucial mechanism in the insurance industry for risk distribution.
C) captive insurance.
Captive insurance is a form of self-insurance where a subsidiary is created to provide insurance to its parent company. It does not involve transferring risk to another insurer, making it irrelevant to the concept of transferring loss exposures as described in the question.
D) reciprocal insurance.
Reciprocal insurance involves a group of individuals or entities that agree to insure each other's risks, sharing losses among themselves. This model does not involve the transfer of risk to another insurance company and therefore does not fit the definition given in the question.
Conclusion
Reinsurance is the only option that correctly describes the transfer of loss exposures from one insurer to another, which is a fundamental aspect of managing risk in the insurance industry. All other options fail to meet the definition either by focusing on different mechanisms of insurance or by not involving a transfer between insurers.