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.