when insurance companies don t want to assume too much risk they transfer the excess risk to reinsurance companies for example an insurance company may routinely write policies that limit its maximum liability to 10 million but it may take on policies that require higher maximum amounts and then transfer the remainder of the risk in excess of 10 million to a reinsurer this subcontract comes into play only if a major loss occurs 
property insurance risk transferpurchasing a home is the most significant expense most individuals make to protect their investment most homeowners buy homeowners insurance with homeowners insurance some of the risks associated with homeownership are transferred from the homeowner to the insurer insurance companies typically assess their own business risks in order to determine whether a customer is acceptable and at what premium underwriting insurance for a customer with a poor credit profile and several dogs is riskier than insuring someone with a perfect credit profile and no pets the policy for the first applicant will command a higher premium because of the higher risk being transferred from the applicant to the insurer 