Risk Sharing
Risk Sharing — an arrangement in which individuals with a common interest collectively assume responsibility for the losses incurred by anyone in the group.
This is a fundamental form of handling risk, observed in cultures around the world.
Examples of risk sharing include:
- Neighbors helping neighbors;
- Faith-based medical cost sharing plans; and
- Reciprocal exchanges.
Risk sharing is similar to insurance, but it is not insurance. Risk sharing is the foundation of a more large-scale, structured system for handling risk called risk transfer, which is buying insurance.