MANAGEMENT

Detailed explanation-1: -How Is Risk Transfer Accomplished? Risk transfer is most often accomplished through an insurance policy. This is a voluntary arrangement between two parties, the insurance company and the policyholder, where the insurance company assumes strictly defined financial risks from the policyholder.

Detailed explanation-2: -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-3: -Although risk is commonly transferred from individuals and entities to insurance companies, the insurers are also able to transfer risk. This is done through an insurance policy with reinsurance companies. Reinsurance companies are companies that provide insurance to insurance firms.

Detailed explanation-4: -Risks can be transferred between individuals, from individuals to insurance companies, or from insurers to reinsurers. When an insurance policy is purchased, the insurance company agrees to compensate the policyholder for specific losses in exchange for the premium received.

Detailed explanation-5: -Risk transfer can be of mainly three types, namely, Insurance, Derivatives, and Outsourcing.