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More importantly, the transferee, who has the major
incentive for risk control, may not have the expertise
or authority to practice effective risk control. So,
the transferor must rely on good faith and financial
security of the transferee, since the landlord will
have the ultimate responsibility to pay up in case of
failure by the tenant.

(iii) Transfer to an insurer - It is possible to transfer
the financial responsibility for certain exposures to
possible loss to a special type of entity, to accept
the responsibility in lieu of a consideration called
premium.

From theinsured's point ofview, this isa risk financing
transfer, the insured is protected against financial
loss arising from specified occurrences. From the
insurer's point of view, this is the risk control device
of combination. By increasing the exposure to
financial losses, those losses become more
predictable, and there is less chance that any one
occurrence of loss will be of significant financial
problem for the insurer.

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