2014.Spring 8 part a. - regarding Reinsurer Facility
This questions asks
"Describe how switching from an ARP to a RF might impact the size of the residual market?"
One of the answers provided in the examiner's report (in the battle cards as well) is "insurer's have more freedom to set rates where there is a RF (versus an ARP)."
I don't understand this answer. Why does the insurer have more freedom to set rates for an RF versus an ARP?