Which of the following is a solution for catastrophic risks?

• A. All of the above
• B. Good underwriting
• C. Diversify risks
• D. Reinsurance

Answer: (A)

Managing catastrophic risks requires multiple protective techniques, not just one. Good underwriting helps ensure that risks are properly selected and priced, so the portfolio isn’t loaded with exposures that are more severe or likely than estimated. Diversifying risks spreads exposure across different locations, lines of business, or types of catastrophe, so a single event doesn’t hit everything at once. Reinsurance shifts part of the risk to another insurer, increasing capacity to absorb large losses and smoothing volatility when a major catastrophe occurs.

Because each of these approaches tackles a different facet of catastrophe risk, using them together provides a more complete protection. That’s why the best answer is All of the above—the combination covers pricing and selection, portfolio concentration, and risk transfer, addressing catastrophic risk from multiple angles.