What is the primary function of a reinsurer?

The primary function of a reinsurer is to provide insurance coverage to other insurers. Reinsurers take on the risk that primary insurance companies write, allowing those companies to reduce the likelihood of being overwhelmed by large claims. By doing this, reinsurers help stabilize the insurance market, enabling primary insurers to underwrite more policies and manage their risks effectively.

This relationship between primary insurers and reinsurers allows insurers to maintain their financial health and solvency by sharing the burden of significant losses. In turn, reinsurers earn premiums for taking on portions of this risk, which is critical for their business model. This collaboration enhances the overall resilience of the insurance industry.

Regarding the other options, selling policies to individuals primarily falls under the roles of primary insurers, while managing insurance claims is typically handled by the insurance companies themselves. Performing audits is usually a function of regulatory bodies or internal compliance teams within insurance companies, rather than a role attributed to reinsurers.