Maryland Life and Health Insurance License Practice Exam

In the context of life insurance risk management, the insurer assuming the risk is referred to as the:

1. Insured

2. Reinsurer

3. Primary insurer

4. Underwriter

The correct answer is: Reinsurer

In life insurance risk management, the entity that assumes the risk from policyholders is known as the primary insurer. This is the insurance company that directly issues the policy to the insured, agreeing to pay a death benefit upon the event of the insured's passing. While a reinsurer is also involved in the risk management process, their role is different. A reinsurer provides insurance to the primary insurer, allowing them to share or transfer a portion of the risk. This setup helps insurers manage their exposure to large claims by spreading the risk across multiple entities. The underwriter is the professional responsible for assessing the risk of insuring a particular applicant. They evaluate various factors, including the applicant's health and lifestyle, to determine insurability and premium rates but do not directly assume the risk. In summary, the primary insurer is the correct choice because it is this entity that directly takes on the risk associated with the life insurance policies they issue.