LLQP Life Insurance · Component 3.1 · 25% of the exam
Reinsurance is:
- Insurance purchased by an insurer from another insurer to transfer part of the risk on large policies
- BA replacement policy issued when the original policy lapses and the client reapplies for the same coverage
- CGovernment insurance that backs up private insurers when a very large claim exceeds their reserves
- DInsurance sold twice to the same client, so that two policies cover the same life for the same need
Correct answer: A) Insurance purchased by an insurer from another insurer to transfer part of the risk on large policies
Insurers cede risk above their retention limit to reinsurers, which lets them write large cases and smooth claims experience. Reinsurers' underwriting manuals also influence how primary insurers rate unusual risks.
Why the other options are wrong
- BA replacement policy is a client-level transaction.
- CReinsurers are private companies, not government.
- DSelling the same coverage twice is not reinsurance.
Exam tip
Reinsurance lets insurers write large cases by ceding risk above their retention. Reinsurer guidelines shape how unusual risks are rated.
Common mistake
Confusing reinsurance with double insurance on one life.
What this tests
CISRO competency component 3.1 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Life Insurance module. Written against the published curriculum.
More from component 3
- At policy delivery, the agent should obtain:
- The effective date of a life insurance policy is generally:
- A client's application is approved but he has not paid the first premium when the policy is delivered. The agent should:
- A pre-authorized debit form is part of implementation because:
- During implementation, the agent learns the client wants the policy owned by her corporation instead of personally, as first applied for. The correct step is:
- Which of the following is a legitimate reason an insurer might refuse to issue a policy even after favourable underwriting?
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.