Which term describes an insurance company's primary source of risk transfer to another entity?

The correct term for an insurance company's primary source of risk transfer to another entity is "Reinsurer." A reinsurer is a company that provides financial protection to insurance companies by assuming some of the risks they underwrite. When an insurance company recognizes that it has taken on more risk than it is willing or able to handle, it may seek to transfer a portion of that risk to a reinsurer. This process is crucial because it helps the original insurance company maintain financial stability, manage risk effectively, and ensure that it can pay claims to policyholders.

The term "Ceding Company" actually refers to the insurance company that is transferring risk to the reinsurer, not the reinsurer itself. While the ceding company plays a vital role in the risk transfer process, it is not the primary source of risk transfer. The reinsurer is the entity accepting the risk from the ceding company.

Understanding these distinctions is essential for recognizing the operational structure within the insurance industry, particularly in the context of how companies manage risk.