5. Weldon Company has a fleet of tank trucks. Oil companies and service stations hire Weldon trucks to transport oil, gas, and diesel fuel. Because of difficulty in obtaining affordable insurance for environmental impairment liability, truckers liability and physical damage, and workers compensation, Weldon formed its own insurance subsidiary. The Vermont-based subsidiary collects premiums, issues policies, and pays Weldons covered liability claims. The organization that Weldon Company formed is called a

Select one:

A. Protected cell company.

B. Risk retention group.

C. Captive insurance company.

D. Reinsurance company.

6. Which of the following companies would be best suited for participating in an insurance pool?

Select one:

A. A large book seller with hundreds of local retail stores interested in insurance for their fleet of vehicles.

B. A construction company has had good results in a group captive but would like more control over their insurance program.

C. A multi-state Fortune 500 home supply company with adequate liquidity that is seeking workers compensation coverage for its 5,000 employees.

D. A local school district that is purchasing new buses and looking to reduce its insurance expense by joining a workers compensation pool.

7. If a captive insurer is established to provide coverage for loss exposures that the parent company has difficulty insuring privately, how does the captive insurer typically deal with such risks?

Select one:

A. By insuring difficult-to-insure loss exposures of other companies, effectively pooling the exposure

B. By capping the liability on a per-loss basis, with the parent company assuming losses above the liability cap

C. Through purchasing excess of loss reinsurance

D. Through purchasing proportional reinsurance