1.2

Question 1

An insurer’s _________ represents its financial strength and is based on its claims experience, investment performance and dividend returns, as well as an insurer’s management team, among other factors.

Answer 1

financial rating

Question 2

What are some financial rating companies that provide consumers with the financial rating of each insurer?

Answer 2

Standard and Poor’s, Moody’s, AM Best

Question 3

__________ is the retention of risk by providing funding for smaller, specified loss from within company reserves. A business will ‘self-insure,’ or pay for smaller claims from an established fund maintained by the business mainly to avoid costly insurance premiums for relatively small claims.

Answer 3

Self-Insurance

Question 4

Retaining risk is only used in circumstances where a large enough group of similar (homogeneous) exposure units exist, and the business has the necessary amount of ______.

Answer 4

capital available on reserve to cover the potential loss

Question 5

_________ Insurance, also known as Inter-insurance, is a type of risk retention between members, known as subscribers, consisting of individual business owners, corporations, or municipalities. Subscribers ‘reciprocate’ in sharing risks and participate in indemnifying members who encounter loss.

Answer 5

Reciprocal