Apex Insurance Company Wrote a Large Number of Property Insurance

question 16

Multiple Choice

Apex Insurance Company wrote a large number of property insurance policies in an area where earthquake losses could occur.When the president of Apex was asked if she feared that a severe earthquake might put the company out of business,she responded,"Not a chance.We transferred most of that risk to other insurance companies." An arrangement by which an insurer that initially writes insurance transfers to another insurer part or all of the potential losses associated with such insurance is called

• A)hedging.
• B)speculating.
• C)reinsurance.
• D)loss avoidance.

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Definitions:

Dissolved

The process of formally ending the existence of a business, partnership, or corporation.

Interest Rate

The percentage of an amount of money charged for its use per a certain period.

Perpetuity

A type of annuity that generates an infinite series of payments into the future, without an end date.

Present Value

The value now of a future monetary total or cash flows, based on an established return rate.