What is one of the main purposes of reinsurance?

The main purpose of reinsurance is indeed to reduce exposure to risk. Reinsurance allows insurance companies to transfer a portion of their risk to another insurer, which can help to stabilize their financial standing and increase their capacity to underwrite more policies. By doing so, an insurer can effectively limit its potential losses from catastrophic events or large claims, which helps maintain solvency and protect against unexpected financial strain. This risk-sharing mechanism enables insurers to take on more business and provides additional security for policyholders, ensuring that claims can be paid even in adverse situations.

The other options do not align as clearly with the primary function of reinsurance. While reducing risk management requirements or underwriting costs might be secondary effects of effective reinsurance strategies, they are not the fundamental purpose of reinsurance. Reducing the frequency of losses is also not an accurate representation of reinsurance, as it does not directly influence how often claims occur. Instead, reinsurance primarily aims to mitigate the impact of those losses by spreading the risk across multiple parties.