Which of the Following Statements About the Use of a Captive

question 46

Multiple Choice

Which of the following statements about the use of a captive insurance company by a parent firm is true?

• A)The captive may not write outside,non-parent company,business.
• B)Captives are not permitted to use reinsurance,so any business insured by the captive stays with the captive.
• C)The captive may be used to insure loss exposures that the parent firm finds it difficult to insure with private insurers.
• D)Business placed with the captive is always considered retained risk and is never considered transferred risk.

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Definitions:

Current Ratio

A ratio that determines a company's capacity to fulfill immediate financial commitments using its present assets.

Total Debt Ratio

A financial metric that compares the total debt of a company to its total assets, indicating the leverage and financial risk of the company.

Liquidity Ratios

Financial ratios that measure a company's ability to meet its short-term obligations with its liquid assets.

Trade Credit

A type of commercial financing where a business allows its customers to purchase goods or services and pay for them at a later date.