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What Is Risk Transfer ?
by 趙永祥 2019-02-25 06:35:23, Reply(0), Views(95)

What Is Risk Transfer? 


What Is Risk Transfer? 

Risk transfer is a risk management and control strategy that involves the contractual shifting of a pure risk from one party to another. One example is the purchase of an insurance policy, by which a specified risk of loss is passed from the policyholder to the insurer. 

Other examples include hold-harmless clauses, contractual requirements to provide insurance coverage for another party’s benefit and reinsurance. When done effectively, risk transfer allocates risk equitably, placing responsibility for risk on designated parties consistent with their ability to control and insure against that risk. Liability should ideally rest with whichever party has the most control over the sources of potential liability. 

Consider the following prior to making an agreement: • Because your business may be part of several contractual relationships at one time, it is important to control the type and magnitude of the liabilities you assume. 

• Where legally possible, identify opportunities to manage risk by having others contractually assume their share of liability. 

• The effective management of liabilities can save you money by lowering your overall costs, thus helping to keep you competitive in the marketplace.


Written by Dr. Chao Yuang Shiang (趙永祥 博士)

 Faculty, Dep. of Finance, Nan Hua university

 (南華大學財務金融學系暨財務管理研究所 專任助理教授)

 25- February- 2019