Transfer of risk

Transfer of risk is a risk management technique that takes the certain risks from the company to other partner, usually insurance institution. If someone buys car insurance, he/she transfers part of risk of car crash to insurance company. It is important to remember that not all the risks can be transferred. As in example - lost health can never be recovered.

Also insurance companies transfer risks, as they use reinsurance services. In this day and age it's almost impossible for insurance company to operate without reinsurance. Extensive problems of several large customers of such company could lead to the bankrupcy. Reinsurance helps to transfer risk and survive difficult period.


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