AD Banker Comprehensive Practice Exam

What consists of groups of underwriters called syndicates that specialize in insuring particular types of risk?

1. Lloyds of London

2. Risk retention insurers

3. Self insurers

4. Reciprocal insurers

The correct answer is: Lloyds of London

The correct answer is Lloyd's of London. This organization operates as a marketplace where various syndicates of underwriters come together to pool and spread risk across different types of insurance policies. Each syndicate specializes in underwriting certain types of risks, such as marine, aviation, or large commercial projects. This specialization allows them to effectively assess and manage the unique aspects and potential liabilities associated with these risks. Lloyd's doesn't directly insure policies but rather provides a structure for these syndicates to operate within, where they can share information and resources. The focus on specialization means that risk is more precisely evaluated, leading to better pricing and underwriting practices. Other options, such as risk retention insurers, self-insurers, and reciprocal insurers, operate under different models. For example, risk retention insurers typically take on risks to retain them within a group rather than spreading them across multiple parties, while self-insurers assume their own risk rather than transferring it to another party. Reciprocal insurers operate through a mutual insurance model where groups of subscribers provide coverage for one another, but they do not specifically organize into syndicates specialized by type of risk in the same way as Lloyd's of London does.