Which entity specializes in accepting risk from other insurance companies?

• A. Policyholder
• B. Lloyd's of London
• C. Insurance broker
• D. Reinsurer

Answer: (D)

Accepting risk from other insurers is the core function of a reinsurer. In the insurance system, primary insurers issue policies and face potential large losses. To protect solvency, expand capacity to write more or bigger policies, and stabilize results, they transfer part of that risk to a reinsurer. The reinsurer then assumes that risk and helps cushion the impact of big claims or catastrophes, often spreading the risk further if needed. This makes the reinsurer the entity specialized in taking on risk from other insurance companies.

Policyholders are the people who buy and hold insurance policies, not the bodies that absorb other insurers’ risk. A broker acts as an intermediary who helps connect buyers with insurers, not someone who takes on risk. Lloyd’s of London is a marketplace where many underwriters operate; it facilitates risk-sharing but isn’t by itself defined as the entity that specializes in accepting risk from other insurers—that role is filled by the reinsurer.