Certified Professional in Health Care Risk Management (CPHRM) Practice Exam 2026 - Free CPHRM Practice Questions and Study Guide

The term that describes contractual arrangements where one insurer purchases insurance from another is reinsurance. This practice allows insurance companies to manage risk by transferring a portion of their liabilities to another insurer, known as the reinsurer. Reinsurance helps primary insurers to stabilize their loss experience and protect against catastrophic events, which can threaten their financial stability.

Reinsurers provide insurance coverage to other insurers, thus sharing the liability associated with the policies they underwrite. This enables primary insurers to take on more risk, knowing that they have a safety net in place through their reinsurance agreements. The use of reinsurance is a fundamental aspect of the insurance industry, as it promotes greater risk management and helps ensure that insurers can meet their obligations to policyholders even in the face of large claims.

Other terms listed, such as self-insurance, refer to an entity's decision to set aside funds to cover potential losses rather than purchasing insurance. Subsidized insurance typically involves financial assistance to lower premium costs but does not relate to the practice of one insurer covering another. Aggregate insurance is concerned with covering a group of risks or losses, yet it doesn't capture the concept of purchasing insurance between insurers.