Alberta General Insurance Level 1 Practice Exam

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What strategy do insurers NOT use reinsurance for?

To share profits equally among all parties

Insurers do not use reinsurance to share profits equally among all parties because reinsurance is a risk transfer mechanism used to protect insurers against large losses, not to distribute profits. The other options, including reducing catastrophic loss, writing a higher level of risk, and maintaining a proper reserve/liability balance, are all common reasons why insurers use reinsurance.

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To reduce the effects of catastrophic loss

To write a higher level of risk

To maintain a proper reserve/liability balance

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