Exam DISC-RM Practice Question 467
Study guide: Exam DISC-RM
An insurer sells both life insurance and annuities to similar customers. If its customers live longer than expected, the life block gains and the annuity block loses by a similar amount; if they die sooner, the reverse happens. The two product managers each propose buying reinsurance against their own block's mortality risk. Which treatment best reflects treating the risk holistically?
- A) Buy both reinsurance programs, since each block is exposed on its own
- B) Reinsure only the annuity block, since its potential loss is the larger
- C) Stop selling annuities, to avoid longevity risk altogether
- D) Retain the offsetting risk and treat only any net exposure left over
Answer this question and see the worked solution