Why might an insurer delay acceptance of a life assurance application that exceeds the reinsurance limit?

An insurer might delay acceptance of a life assurance application that exceeds the reinsurance limit primarily to review additional risks. When a life assurance application exceeds a specified amount, the insurer needs to assess the potential for significant loss. This involves a comprehensive evaluation of the applicant's health, lifestyle, and other factors that may affect the risk level. By conducting this thorough review, the insurer ensures that they have the necessary information to make an informed decision regarding acceptance and pricing of the policy.

In scenarios where the application amount is higher than the reinsurer's limit, it is particularly critical for the insurer to thoroughly evaluate possible risks because of the financial implications involved. This process can involve consulting with underwriters, obtaining additional medical reports, and potentially seeking reinsurance options for the excess amount. The risk evaluation is an essential part of managing the insurer’s portfolio effectively to avoid taking on unsustainable risk.