MANAGEMENT

Detailed explanation-1: -Similar to how individuals or entities purchase insurance from insurance companies, insurance companies can shift risk by purchasing insurance from reinsurance companies. In exchange for taking on this risk, reinsurance companies charge the insurance companies an insurance premium.

Detailed explanation-2: -Risk transfer can also be accomplished through non-insurance agreements such as contracts. These contracts often include indemnification provisions. An indemnity clause is a contractual provision in which one party agrees to answer for any specified and unspecified liability or harm that the other party might incur.

Detailed explanation-3: -Risk transfer can be of mainly three types, namely, Insurance, Derivatives, and Outsourcing. Insurance: In the case of Insurance, there is an insurance policy issued by the company, the risk bearer, to the policyholder, to compensate for the specified risks to the insured asset of the policyholder.

Detailed explanation-4: -Yes, Insurance involves sharing of risk. When the insured suffers a loss the insurance company pays him the compensation for the loss. Such loss is not actually paid by the insurer himself. He only distributes the loss suffered by an insured person among other policy holders who are exposed to a similar risk.

Detailed explanation-5: -Risk transfer, or risk sharing, occurs when organizations shift the risk to a third party. A typical example of this occurs in the domain of financial loss. The vulnerable organization can transfer its risk of financial loss to an insurance company for a small premium.