Which transfer of risk from one to many?

• A. Insurance
• B. Exposure
• C. Pure Risk
• D. Peril

Answer: (A)

Transferring risk to a large group happens through insurance. In an insurance arrangement, an individual pays a premium and the insurer takes on the possibility of a loss for many insureds. By pooling these premiums, the insurer can cover the claims of the few who experience losses, spreading the financial impact across thousands of people. This sharing of risk is what makes insurance effective.

Exposure is simply the potential for loss, not a transfer. Pure risk refers to a type of risk that involves potential loss with no possibility of gain, which insurance can cover but does not describe the transfer mechanism itself. Peril is the specific cause of a loss (like fire or theft), not the act of transferring risk.