If an insurer with inadequate regulatory capital does NOT want to raise more capital or reduce the amount of business it underwrites, what immediate action may the insurer normally take?

An insurer with inadequate regulatory capital may choose to purchase additional reinsurance as an immediate action to help mitigate its risk exposure. By increasing its reinsurance coverage, the insurer can transfer a portion of its risk to another party, thus protecting its capital base. This strategy can help stabilize the financial position of the insurer without the need to raise new capital or limit its business activities directly.

Reinsurance acts as a financial safety net, allowing the insurer to underwrite the same volume of business while reducing the potential losses it would face in the event of large claims. This approach can improve the insurer's risk profile, making it more compliant with regulatory requirements without altering its overall business strategy.

Other options like seeking additional investors, cutting down on marketing expenses, or limiting policy offerings may not address the underlying issue of inadequate capital as effectively as purchasing reinsurance. Each of those alternatives comes with its own set of challenges and may ultimately impact the insurer's growth trajectory or market competitiveness. Therefore, purchasing additional reinsurance stands out as a practical solution for managing regulatory capital concerns while maintaining business operations.