7
AssignmentMultiple Choice

Asset-backed Securities, Loan Sales, and Derivatives

Question 7 • (AG Q4) Financial Literacy: 25-26 (JRush)

Reinsurance companies are important mainly because they _____.

Answer
A
offer insurance to people who are difficult to insure
B
provide insurance companies with a way to stop losses
C
manage insurance companies’ reserve accounts
D
make additional insurance policies available to some people

Explanation

Reinsurance is insurance that an insurance company buys from another company. It helps the original insurer share or transfer the cost of very large claims, limiting its potential losses. Therefore, “provide insurance companies with a way to stop losses” is the best choice.

AI-written and checked against the verified answer.

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