The correct option is C. re-insurance. Explanation of the Correct Answer Re-insurance is a practice used by insurance companies to manage risk. When an insurance company (the primary insurer) takes on a large risk, it may choose to share that risk with other insurance companies (reinsurers). This is done to protect the primary insurer from significant financial loss in the event of a large claim or multiple claims. How Re-insurance Works:

1. Risk Assessment: The primary insurer evaluates the risk associated with a policy or a group of policies. If the risk is deemed too high, the insurer may seek re-insurance.
2. Re-insurance Agreement: The primary insurer enters into a contract with one or more reinsurers. This contract specifies the terms, including how much of the risk will be shared and the premium to be paid to the reinsurer.
3. Risk Sharing: In the event of a claim, the reinsurer will cover a portion of the loss, thus reducing the financial burden on the primary insurer. This allows the primary insurer to take on more policies without overexposing itself to risk.

Why Other Options Are Incorrect A. Subrogation: - Subrogation is a legal right that allows an insurance company to pursue a third party that caused an insurance loss to the insured. Essentially, after paying a claim, the insurer can "step into the shoes" of the insured and seek recovery from the responsible party. This is not about sharing risk but rather about recovering costs after a claim has been paid. B. Contribution: - Contribution refers to the principle that when multiple insurance policies cover the same risk, each insurer will pay a proportionate share of the claim. This is relevant when a loss is covered by more than one policy, but it does not involve the transfer of risk to another insurer as in re-insurance. D. Indemnity: - Indemnity is a principle in insurance that ensures that an insured party is compensated for their loss, restoring them to the financial position they were in before the loss occurred. While indemnity is a fundamental concept in insurance, it does not involve sharing risk with other insurers. Summary of Key Points

• Re-insurance is a risk management tool used by insurance companies to share large risks with other insurers.
• It helps protect primary insurers from significant financial losses.
• Subrogation, contribution, and indemnity are related concepts but do not involve the sharing of risk in the same way as re-insurance.
• Understanding these terms is crucial for grasping how insurance companies operate and manage their risk exposure.

Revision Summary

• Re-insurance allows insurers to share large risks with other companies.
• It protects against significant financial losses from claims.
• Subrogation, contribution, and indemnity are different concepts not related to risk sharing.
• Familiarity with these terms is essential for understanding insurance operations.