What is the process called when an insurer transfers risk to another insurance company?

The process of transferring risk from one insurance company to another is known as reinsurance. During this process, an insurance company, often referred to as the ceding insurer, purchases insurance in order to mitigate its risk exposure, typically by sharing a portion of its liabilities with another insurer, known as the reinsurer. This practice helps insurers manage their overall risk profile, stabilize their financial footing, and ensure they can cover large claims or losses.

Reinsurance is an essential tool in the insurance industry, allowing companies to maintain solvency and reduce their likelihood of experiencing catastrophic losses. By spreading risk, insurers can also offer coverage for larger amounts, which might not be feasible without this safety net.

The other options presented refer to different aspects of insurance operations. Underwriting involves evaluating and selecting risks that an insurer is willing to insure, risk assessment focuses on identifying and evaluating potential risks, and loss exposure management deals with strategies to manage and mitigate potential losses. These processes are crucial in the insurance landscape but do not directly involve the transfer of risk to another company, which is the defining characteristic of reinsurance.