The bulk of the premium required by the insurer to assume risk is used to compensate those who incur covered losses.Loss sharing is accomplished through premiums collected by the insurer from all insureds-from those who may not suffer any loss to those who have large losses.In this regard, the losses are shared by all the risk exposures.This is the essence of:

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Risk pooling, also known as insurance, involves collecting premiums from a group of insured entities to pay for the losses of those within the group who incur them. This spreads the financial risk of losses across all members of the pool, rather than each member bearing the full cost of potential losses individually.

The Bulk of the Premium Required by the Insurer to Assume