ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -What Is Transfer of Risk? A transfer of risk is a business agreement in which one party pays another to take responsibility for mitigating specific losses that may or may not occur. This is the underlying tenet of the insurance industry.

Detailed explanation-2: -Risk. Insurance is the transfer of financial responsibility associated with a potential of loss (risk) to an insurance company. For the purpose of insurance, risk is defined as: The uncertainty or chance of loss.

Detailed explanation-3: -What Is the Purpose of Underwriting Today? Underwriting, whether for an insurance policy or a loan, revaluates the riskiness of a proposed deal or agreement. For an insurer, the underwriter must determine the risk of a policyholder filing a claim that must be paid out before the policy has become profitable.

Detailed explanation-4: -Risk transfer is a risk management and control strategy that involves the contractual shifting of a pure risk from one party to another. One example is the purchase of an insurance policy, by which a specified risk of loss is passed from the policyholder to the insurer.

Detailed explanation-5: -Insurance is a contract in which an insurer indemnifies another against losses from specific contingencies or perils. It helps to protect the insured person or their family against financial loss. There are many types of insurance policies.