What is the primary purpose of insurers selling reinsurance?

The primary purpose of insurers selling reinsurance is to decrease their financial liabilities. Reinsurance acts as a safeguard for insurance companies, allowing them to transfer a portion of their risk to other insurers. By doing so, they can manage and limit their exposure to significant losses from large claims or catastrophic events. This transfer of risk helps maintain the financial stability of the original insurer, ensuring they can meet their obligations to policyholders and maintain adequate reserves.

Additionally, reducing financial liabilities through reinsurance helps improve an insurer's balance sheet, allowing them to underwrite more policies and protect their solvency. This approach promotes a healthier overall insurance market by dispersing risk and preventing excessive concentrations of liability within a single company.