Question

When the insurer transfers its large portion of the risk to the other insurer to bear the risk proportionately, then it is called .............

Hint:

Reinsurance = Insurance for insurers to manage large or unexpected risks.

Answer 1

Insurance companies sometimes face huge risks that can cause major financial loss if claimed at once.
To manage this, they transfer a part of their risk to another insurance company — this process is called Reinsurance.
In reinsurance, the original insurer (called the ceding company) shares the risk with the reinsurer to spread the liability.
This helps insurance companies maintain financial stability even when they issue large policies or face unexpected high claims.
Reinsurance is an important tool for risk management and solvency in the insurance industry.
Therefore, when the insurer transfers its large portion of risk proportionately, it is called Reinsurance.