A basic underlying principle of insurance, whereby the risk of financial loss is transferred from one party to another.
***
Shifting all or part of a risk to another party. Insurance is the most common method of risk transfer, but other devices such as hold harmless agreements, also transfer risk. One of the four major risk management techniques. Shifting of the legal responsibility for loss or the financial burden of loss, either through Insurance or non-Insurance transfer. See Also: “Insurance,” and “Non Insurance transfer.” Transferee : Organization, person or other entity that receives a transferred exposure. Transferor : Organization, person or other entity that transfers an exposure to another.Transferable Letter of Credit : A letter of credit that allows all or a portion of the proceeds to be transferred from the original beneficiary to one or more additional beneficiaries.
***
One of the major risk management methods, which is done by reassigning risk to another party. Insurance is a type of risk transfer.