ABC Insurance Company entered into a reinsurance agreement with XYZ Reinsurance
Under the contract, XYZ Re has no liability unless ABC's loss ratio exceeds 85 percent for the year. XYZ Re agreed to pay all losses in excess of the 85 percent loss ratio. ABC Insurance Company is using reinsurance to
A) stabilize profits.
B) reduce the unearned premium reserve.
C) provide large risk capacity.
D) retire from a line or territory.
Answer: A
Business
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