A lower net retention level typically would translate into a higher v\variability of reserves.
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A. B.B
The statement is true. A lower net retention level typically would translate into a higher variability of reserves.
Net retention level refers to the portion of the premium that is retained by an insurance company after paying out claims and other expenses. In other words, it is the amount of premium an insurance company keeps to cover future losses. The higher the net retention level, the more risk an insurance company is willing to take on.
When an insurance company has a lower net retention level, it means that it is transferring more of the risk to reinsurers. Reinsurers are companies that provide insurance to other insurance companies. By transferring risk to reinsurers, the insurance company is able to limit its exposure to losses.
However, the cost of reinsurance can vary depending on market conditions, the type of risk being transferred, and other factors. When an insurance company has a lower net retention level, it is more reliant on reinsurance to cover losses. This means that the variability of reserves, or the amount of money set aside to cover future losses, is higher.
In summary, a lower net retention level means that an insurance company is transferring more of the risk to reinsurers, which can result in a higher variability of reserves due to the changing cost of reinsurance. Therefore, the statement "A lower net retention level typically would translate into a higher variability of reserves" is true.