Reinsurance

Reinsurance is like when you ask your friend for extra help in case you can't finish your work on time. When a big company sells insurance to lots of people, it might be worried about losing lots of money all at once if something really bad happens, like a big storm or a big accident. That's where reinsurance comes in.

The big insurance company can ask another company to help share the risk. The second company agrees to pay for some of the losses if something really bad happens. Just like how your friend might help finish some of your homework if you can't do it all by yourself.

This helps the big insurance company feel safer and not lose too much money all at once if something really bad happens. It's like they have a backup plan to help them if they need it.

Reinsurance is important because it allows large companies to offer insurance to lots of people while managing their own risks.