Question

Huge Insurance Company is a property insurer that is interested in protecting itself against cumulative losses that exceed $200 million during the year. This protection can best be obtained using a(n)

a) Quota-share reinsurance
b) Surplus-share reinsurance
c) Excess-of-loss reinsurance
d) Facultative reinsurance

Answer 1

Excess-of-loss reinsurance (c) is the best way for Huge Insurance Company to protect itself against cumulative losses that exceed $200 million during the year.

Step-by-step explanation:

The best way for Huge Insurance Company to protect itself against cumulative losses that exceed $200 million during the year is through excess-of-loss reinsurance (c). Excess-of-loss reinsurance provides coverage for losses that exceed a certain threshold, in this case, $200 million. It protects the insurance company by transferring the risk of these excessive losses to a reinsurer.