The process where an insurance company transfers part of its risk to another insurer is called reinsurance.
The original insurer, known as the ceding company, pays a premium to a reinsurer, which agrees to absorb some of the potential claims. This lets the insurer write larger policies, protect its capital, and make losses more predictable—especially after catastrophes such as hurricanes or earthquakes.
Reinsurance developed alongside marine insurance, with a recorded contract from 1370 covering part of a voyage from Genoa to Bruges. Modern arrangements include treaty reinsurance, which covers a defined portfolio, and facultative reinsurance, negotiated for an individual policy or unusual risk.
Reinsurance is not the same as coinsurance. Coinsurance usually means multiple insurers share a risk directly, while reinsurance is an agreement between an insurer and another insurer behind the scenes. Reinsurers can also buy protection themselves; that secondary arrangement is called retrocession.