Which term refers to sharing risk across multiple insurers?

• A. Reinsurance
• B. Underinsurance
• C. Valuation
• D. Public Exposure

Answer: (A)

Sharing risk across multiple insurers is accomplished through reinsurance. It acts as insurance for insurance companies, allowing the primary insurer to cede part of its risk to one or more reinsurers. This spreads potential losses, protects the ceding company's solvency, and increases its capacity to write large or numerous policies. There are different forms, such as treaty reinsurance, where a portfolio is covered automatically, and facultative reinsurance, which handles individual risks. Reinsurance helps stabilize losses and smooth earnings, especially after big claims or catastrophes. The other terms don’t describe this concept: underinsurance means not being fully insured relative to value, valuation is about determining value, and public exposure is not the standard term for sharing risk across insurers.