Which principle allows an insurer to assume the rights of its insured against a third party for recovery of claims?

The principle that allows an insurer to assume the rights of its insured against a third party for recovery of claims is subrogation. This principle is a crucial part of the insurance process, as it enables insurers to recover the amounts they have paid in claims from responsible third parties.

When an insurer compensates the insured for a loss, it steps into the shoes of the insured regarding the right to pursue further action against the party that caused the loss. This means that the insurer can seek to recover the payment made to the insured from the third party who is at fault. This mechanism not only helps the insurer to recoup their losses but also prevents the insured from receiving a double recovery for the same claim, which could lead to moral hazard.

In essence, subrogation supports the insurance industry by allowing insurers to manage their risk and maintain financial stability while ensuring that those who cause losses are held accountable. Thus, this principle plays an integral role in the equitable functioning of the insurance system.