What is the term for when a risk underwritten by an insurer is ceded entirely or mostly to another insurer?

The term that describes when a risk underwritten by an insurer is ceded entirely or mostly to another insurer is known as "reinsuring." This practice allows a primary insurer to transfer a portion of its risk to a reinsurer, thereby spreading the financial burden associated with insurance claims.

Reinsurance serves multiple purposes, including increasing the capacity of the primary insurer to underwrite more policies, stabilizing its loss experience by drawing on the reinsurer's resources, and providing financial protection against catastrophic losses. It is a crucial part of risk management in the insurance industry, enabling insurers to protect themselves from large or unexpected claims.

While "delegation" refers to transferring authority to another party and "fronting" involves one insurer taking on a policy to fulfill regulatory compliance while passing the underlying risk to another insurer, these terms do not accurately capture the essence of transferring risk as reinsurance does. "Risk sharing" suggests a more collaborative approach in which risks are distributed among insurers, rather than ceded to one party primarily. Therefore, understanding the nuances of these terms is essential for grasping the complex mechanisms of the insurance industry.