Reinsurance is the acceptance by one insurer, known as the reinsurer or the ______________, of all or part of the risk of loss of another (the original) insurer, called the _______________.

Question

Options

• Aassuming company, insurance company
• Bassuming company, ceding company
• Cinsurance company, assuming company
• DReimbursement Company, primary company

• A
  2% (1)
• B
  84% (42)
• C
  4% (2)
• D
  10% (5)

Explanation

Option B is correct because in reinsurance, the company accepting (assuming) the transferred risk is called the assuming company (also called the reinsurer), while the original insurer transferring (ceding) the risk is called the ceding company - these are the standard industry terms.

Why the others are wrong:

• A is reversed - "insurance company" is too generic a label for the one receiving risk; the correct term for the original insurer is "ceding company," not "insurance company."
• C flips the order entirely - "insurance company" doesn't correctly name the reinsurer, and "assuming company" describes the reinsurer, not the original insurer.
• D invents "Reimbursement Company," which is not a recognized industry term; "primary company" is occasionally used colloquially but is not the precise terminology tested here.

Memory tip: Think of the verb pairs - the original insurer cedes (gives away) risk, making it the ceding company; the reinsurer assumes (takes on) that risk, making it the assuming company. Cede = send, Assume = accept.

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