Identify the Correct Statement About Captive Insurance Company

question 38

Multiple Choice

Identify the correct statement about captive insurance company.

• A)Forming a captive insurer is an inexpensive undertaking.
• B)All captives sell coverage to nonaffiliated organizations.
• C)It is self-controlled and independent of its policyholder-parent.
• D)They are forms of self-insurance.
• E)Its formation does not require capital contribution.

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Definitions:

Per Unit

A term used to denote the cost or price of a single item or measure of a service or product.

Relevant Range

The range of activity within which the assumptions about fixed and variable costs are valid for a specific business.

Mixed Costs

Expenses that have both fixed and variable components, changing with the level of production or sales activity but not in direct proportion.

Differential Costs

The difference in cost between two alternative decisions or changes in levels of operation.