Question

Which of the following is an insurer established by a parent company for the purpose of insuring the parent company's loss exposures?

a) Captive insurer
b) Mutual insurer
c) Stock insurer
d) Surplus lines insurer

Answer 1

A captive insurer is an insurer established by a parent company for the purpose of insuring the parent company's loss exposures.

Step-by-step explanation:

The correct answer is a) Captive insurer. A captive insurer is an insurance company that is established by a parent company for the purpose of insuring the parent company's loss exposures.

For example, if a large manufacturing company creates its own insurance company to provide coverage for its own property and liability risks, that insurance company would be considered a captive insurer.

Captive insurers can be more cost-effective for parent companies as they allow for more control over insurance costs and can provide coverage tailored specifically to the parent company's needs.