Risk distribution

{
  "id": "MLC-T-INS-002968",
  "term": "Risk distribution",
  "field": "Insurance and risk management",
  "definition": "The insurance tax concept that an insurer spreads the risk it assumes across a large number of similar, independent exposures, so one loss is paid from the premiums of many insureds and the law of large numbers makes total losses more predictable. Together with risk shifting, it is required for an arrangement to qualify as insurance for federal income tax purposes, and it is a central test for captive insurers.",
  "url": "https://mlchart.com/terminology/insurance/risk-distribution/"
}