Which key method is used by an insurer to protect itself against loss exposures arising from a single event?

Reinsurance cover is a critical method utilized by insurers to mitigate loss exposures that stem from a singular event, such as natural disasters or large-scale accidents. By purchasing reinsurance, an insurer transfers a portion of its risk exposure to another insurance company. This means that if a significant claim arises from an event, the reinsurer will share in or cover part of the liabilities, thereby reducing the financial impact on the primary insurer.

This strategy allows the insurer to manage its capital more effectively, ensuring that it can pay claims while still maintaining financial stability. Essentially, reinsurance acts as a financial safety net, enabling insurers to underwrite larger risks and ensuring that they are not overly vulnerable to catastrophic losses from a single occurrence.

Other methods like premium reviews, policy endorsements, and external risk surveillance have their own roles in the underwriting process, but they do not specifically address the direct transfer of risk associated with single-event loss exposures in the same manner as reinsurance. Premium reviews relate to assessing and adjusting premiums based on risk, policy endorsements modify coverage but do not provide additional risk mitigation, and external risk surveillance involves monitoring risks without directly limiting the financial impact of a significant event.