Casualty Actuarial Society (CAS) Practice Exam

An insurer can recover a claim payment made to an insured for a loss caused by a negligent third party through the process known as subrogation. This legal right allows the insurer to pursue a third party that caused an insurance loss to the insured. Once the insurer pays the insured for the claim, it essentially steps into the shoes of the insured and can seek reimbursement from the negligent party or their insurance company.

Subrogation serves a dual purpose: it helps to ensure that the responsible party is held accountable for their actions and allows the insurer to recoup some of the costs associated with the claim payment, which can help keep insurance premiums more stable for policyholders.

Negotiation could be a part of the process in pursuing a subrogation claim, but it is not the method of recovery itself. Canceling the policy does not allow for recovery of claim payments, as it would terminate the coverage rather than enable the insurer to seek compensation. Reselling the insured assets does not pertain to the recovery of claim payments; instead, it deals with the management of assets rather than the financial recovery from a third-party claim.