One of the basic functions of a sound Underwriting Policy. A system whereby the total amount at risk in any one exposure is spread amongst a large groups of Insurers and Reinsurers so that the ultimate net loss rests lightly on many rather than heavily on a few.
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The selling of insurance in multiple areas to multiple policyholders to minimize the danger that all policyholders will have losses at the same time. Companies are more likely to insure perils that offer a good spread of risk. Flood insurance is an example of a poor spread of risk because the people most likely to buy it are the people close to rivers and other bodies of water that flood. See Adverse selection.