MANAGEMENT

Detailed explanation-1: -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-2: -Methods of Risk Transfer As outlined above, purchasing insurance is a common method of transferring risk. When an individual or entity is purchasing insurance, they are shifting financial risks to the insurance company. Insurance companies typically charge a fee – an insurance premium – for accepting such risks.

Detailed explanation-3: -Risk Transfer Definition The most common way to transfer risk is through an insurance policy, where the insurance carrier assumes the defined risks for the policyholder in exchange for a fee, or insurance premium, and will cover the costs for worker injuries and property damage.

Detailed explanation-4: -The most common form of transferring risk is purchasing an insurance policy transferring risk from the entity pur-chasing the policy to the insurer issuing the policy. Other methods of transferring risk to another party or entity include contractual agreements or requirements and hold harmless agreements.

Detailed explanation-5: -There are always inherent risks (both financial and physical) to projects and commercial ventures however, these can be significantly reduced by transferring risks through the use of insurance and reinsurance. The importance of contract certainty and clarity to provide effective risk transfer cannot be overstated.