What is it called when multiple insurance companies share risk by purchasing insurance?
-
Stock insurance
-
Reinsurance
-
Indemnity
-
Contract
B
Correct answer
Explanation
Reinsurance is the practice where insurance companies transfer part of their risk portfolio to other insurers by purchasing insurance themselves. This protects the original insurer from catastrophic losses. Stock insurance refers to company ownership structure, indemnity is the principle of restoring losses, and contract is too generic.