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MPF intermediaries
MPFMPF Intermediaries ExaminationThe major reason an insurer buys reinsurance is:
Answer: security. The major reason is security: large claims can be met without having to raise cash from investments at short notice.Why not the others:• tax advantages: reinsurance is not bought mainly for tax reasons.• lower commission costs: reinsurance does not reduce commission.• access to the reinsurer's agents: reinsurers do not supply sales forces.Watch out: Choosing underwriting capacity, which is another important reason but not the major one.Rule: Reinsurance gives security and increases underwriting capacity.Source: IA P1 Study Notes 2024 Ed. §4.8(b), p.4/6
Choosing underwriting capacity, which is another important reason but not the major one.
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