What is the process of transferring risk to an insurance company called?

The process of transferring risk to an insurance company is referred to as insurance. When individuals or businesses purchase insurance policies, they are essentially transferring their financial risk from potential losses (such as damage to property or liability claims) to the insurer. The insurance company assumes this risk in exchange for the premium paid by the policyholder. If a covered loss occurs, the insurer provides financial compensation, effectively managing the risk for the insured.

Risk management encompasses a broader set of strategies aimed at identifying, assessing, and mitigating risks rather than solely transferring them. Risk transfer is a component of risk management but is not the term specifically used to denote the act of shifting the risk to an insurer. Loss prevention, on the other hand, refers to strategies and measures taken to avoid losses from occurring in the first place, which is separate from the concept of transferring risk.