The practice by which an insurance company accepts a very large risk and later s...
QuestionThe practice by which an insurance company accepts a very large risk and later shares it with other insurance companies is called
The correct answer is C.
The question is asking about a practice in the insurance industry where one insurance company takes on a very large risk and then shares it with other insurance companies.
The options given are:
- Option A: subrogation
- Option B: contribution
- Option C: re-insurance (Correct)
- Option D: indemnity
The correct answer is Option C: re-insurance.
Re-insurance is when an insurance company transfers a portion of its risk to another insurance company. This is done to reduce the financial impact of a large claim or loss. By sharing the risk with other insurance companies, the original insurance company can protect itself from potential financial losses.
Subrogation, Option A, refers to the process by which an insurance company seeks reimbursement from a third party for a claim it has paid out. This is not the same as the practice described in the question.
Contribution, Option B, is the sharing of a loss or claim by multiple insurers who have covered the same risk. This is not the same as the practice described in the question.
Indemnity, Option D, refers to the principle of compensation for loss or damage. This is not the same as the practice described in the question.
So, the correct answer to the question is Option C: re-insurance.
More Past Questions:
- English Language
- Christian Religious Knowledge
- Literature In English
- Agricultural Science
- General Paper
- Islamic Religious Knowledge
- Computer Studies
- Further Mathematics
- Civic Education
- Current Affairs
- Catering Craft Practice
- Data Processing
- Animal Husbandry
- Writing and Language
- Fine Arts
- Home Economics
- Basic Accounting