Risk transfer is the process where the responsibility for the risk is taken by the insurer from the policyholder after the purchase of an insurance policy. The insurance policy constitutes an involuntary arrangement between the insurer and the policyholder . During an insurance contractual agreement, an indemnity clause is signed to enable one party to answer for any liability or harm that may affect another party ( Banks, 2004) . The objective of indemnification is to enable the transfer of financial consequences from the indemnitee to the Indemnitor . Furthermore, there may be legal defense or recall costs during some contracts.
A layer of protection is then provided in various ways such as a certificate of Issuance, Additional insured status, and Indemnification provisions in contracts and leases. A certificate of insurance constitutes a form issued by an agent and provides a list of coverage, dates of expiration, and limits to coverage. It also contains special endorsements that have been incorporated into the policy such as additional waiver insured endorsements, subrogation endorsements and cancellations of endorsements. The certificate of issuance also acts as a proof of terms and conditions of the policy described. During the establishment of insurance requirements from subcontractors, the policyholder should determine the adequacy of insurance requirements for a particular situation from a legal counsel ( Mulcahy et al., 2013) . A reminder system should be established that provides the employer with the opportunity to review the certificate and know the policy’s expiry date. The policyholder can also ask for additional insured status from the subcontractors, tenants, and other parties involved in managing the risk transfer.
Delegate your assignment to our experts and they will do the rest.
The transfer of risk also involves an identification of additional insured status that provides particular rights under the policy. The addition of an additional insured status enables the policyholder to acquire insurance policy from another company. The endorsement that involves the addition of another company is referred to as additional insured endorsement ( Mulcahy et al., 2013) .
The indemnification agreements, sometimes called hold-harmless agreements, enable the transfer of risk, loss or liability from one party to another. They are usually included in the signing of contracts, purchase of agreements, and rental contracts. Some countries have laws that require particular wordings to enable transfer to be affected, while a number of states do not allow particular wording or transfer of risks. Due to the variations in individual state laws and circumstances, it is significant that a legal counsel should be contacted to enable discussion of the terms of a hold-harmless indemnity agreement that are applicable to a particular situation ( Mulcahy et al., 2013) .
The signing stage involves securing signed written contracts with subcontractors and service providers before the beginning of their work or lease in order to enforce the agreements in a more beneficial manner to the policyholder . The policy holder’s attorney can be contracted to draft a contract that names the applicant as an additional insured in the context of the general liability policy. The policyholder and insurance agents review the documentation involved in the signing of the contract to determine the level of accuracy and the requirements prior to documentation of the lease. The assigned person also reviews and approves all the certificates of insurance and signed contracts and purchase orders prior to the commencement of any lease. The parties involved in the transfer of the risk then keep records pertaining to purchases, leases, other contracts and certificates of insurance in accordance with the laws and regulations in the industry in which they operate ( Banks, 2004) .
References
Banks, E. (2004). Alternative risk transfer: integrated risk management through insurance, reinsurance, and the capital markets . John Wiley & Sons.
Mulcahy, A., Harris, K., Finegold, K., Kellermann, A., Edelman, L., & Sommers, B. D. (2013). Insurance coverage of emergency care for young adults under health reform. New England Journal of Medicine , 368 (22), 2105-2112.
