An estimate due to time lags in the receipt of reports from cendants is called reinsurance.

The statement provides an incorrect definition. Reinsurance is a contract through which an insurance company (the ceding company or "cedant") transfers a portion of its risks to another company (the reinsurer). The goal is to reduce the ceding company's exposure to loss.

An "estimate due to time lags in the receipt of reports from cendants" refers to a component of the reinsurer's loss reserves, specifically the Incurred But Not Reported (IBNR) reserve. This reserve is a liability established to account for losses that have occurred but have not yet been reported to the reinsurer by the ceding company. It is an accounting estimate, not the definition of reinsurance itself.

A. True: This is incorrect because it conflates a financial liability estimate (a reserve for reporting lags) with the fundamental practice of risk transfer (reinsurance).

1. Casualty Actuarial Society. (2001). Foundations of Casualty Actuarial Science (4th ed.).

Chapter 8

"Reinsurance

" Section 1

defines reinsurance as a transaction where one insurer indemnifies another for a specified share of a loss. It is described as "insurance for insurance companies."

Chapter 5

"Loss Reserving

" Section 2.1

defines Incurred But Not Reported (IBNR) reserves as an estimate for future payments on losses that have already occurred but have not yet been reported to the insurer. This concept directly applies to the reporting lags from cedants to reinsurers.

2. Strain

R. W. (Ed.). (1997). Reinsurance (3rd ed.). Strain Publishing and The College of Insurance.

Chapter 1

"An Overview of Reinsurance

" p. 1

states

"Reinsurance is the transfer of part of the hazard or risk that a direct insurer assumes... to another insurance carrier."

Chapter 15

"Reinsurance Accounting and Statistics

" p. 451

discusses the establishment of loss reserves by reinsurers

including IBNR

which must account for the "time lag in the ceding company's reporting of statistics to its reinsurer."

3. Swiss Re. (2019). The essential guide to reinsurance.

Page 4 defines reinsurance as: "In essence

reinsurance is insurance for insurance companies... Reinsurers share the risk

and therefore the losses

with their clients." This official publication from a major reinsurer clearly separates the definition of reinsurance from the accounting reserves associated with it.