Excess of loss reinsurance is particularly useful for an insurer when dealing with which of the following?

Excess of loss reinsurance is designed to protect insurers from significant losses that exceed a predefined threshold. This type of reinsurance is particularly valuable when insurers face high-cost claims, as it allows them to manage their risk exposure effectively. By utilizing excess of loss agreements, insurers can limit their maximum loss from catastrophic events while still covering smaller risks within their retention limits.

When claims rise above the specified limit, the excess of loss reinsurer steps in to cover costs, thereby providing financial cushion and stabilizing the insurer's balance sheet. This strategy is essential for protecting against the impact of large claims, ensuring that the insurer can continue to operate without jeopardizing their solvency or profitability.

In contrast, frequent minor claims may not necessitate the same kind of reinsurance strategy, as these are typically manageable within the insurer's usual operational framework. Similarly, regulatory compliance costs and low-level risks do not present the same potential for overwhelming financial impact that high-cost claims do, making excess of loss reinsurance less relevant in those contexts. Thus, the focus on large individual claim amounts makes option B the most appropriate choice.