What do we call the entity to which insurers transfer part of a risk they cannot retain?

The entity to which insurers transfer part of a risk they cannot retain is known as a reinsurer. Reinsurers provide a safety net for primary insurers, allowing them to manage risk more effectively by sharing or offloading certain portions of their liability. This practice helps insurers stabilize their finances and protect against significant losses that could arise from large claims or catastrophic events.

Reinsurance is a critical component of the insurance industry because it enables insurers to underwrite more policies and take on greater risk, knowing that they can transfer some exposure to reinsurers. This process allows for greater diversification and capacity within the insurance market. Reinsurers may operate on various terms, such as proportional sharing of losses or non-proportional arrangements where they only pay if losses exceed a certain threshold.

While the other terms—such as assignee, cedant, and co-insurer—have their specific meanings within the context of insurance, they do not accurately describe the entity responsible for assuming part of an insurer's risk. The cedant, for example, refers to the insurance company that cedes or transfers risk to the reinsurer, while a co-insurer refers to another insurer that shares in the risk of a particular policy directly with the primary insurer. Understanding these distinctions is essential to