Which term describes the process where insurers share the risk of a particular policy through a primary and secondary policyholder relationship?

The term that describes the process where insurers share the risk of a particular policy through a primary and secondary policyholder relationship is reinsurance. In reinsurance, an insurance company (the primary insurer) transfers a portion of its risk to another insurance company (the reinsurer), allowing the primary insurer to limit its losses while also enabling it to underwrite more policies than it could if it retained all the risk. This arrangement helps stabilize the primary insurer's operations by protecting it from large claims and catastrophic events, ensuring they can meet their obligations to policyholders.

This sharing of risk is a critical function in the insurance industry, as it boosts the capacity of insurers to bear high levels of risk and manage their potential exposures more effectively. This facilitates a healthy insurance market and helps in maintaining competitive pricing for consumers.

The other terms, while related to insurance, do not describe the same process. Underwriting refers to the process insurers use to assess risk and determine the terms and conditions for coverage. Risk pooling involves the gathering of various risks into a single group to spread the risk among various insureds, but it does not specifically refer to the relationship between primary and secondary policyholders. Co-insurance refers to a situation where two or more insurers share the coverage of a risk