Mutualization of Risk

The spread of risk among several parties. For example, if five investors each put in $200,000, and the total amount of the investment equals $1 million, risk is mutualized because no one investor can possibly lose the whole million.

References in periodicals archive ?

No doubt, the regulator sees the mutualization of risk playing a similar role in the domestic marketplace as it has done elsewhere, particularly as the industry grows in size and sophistication," said Anthony Egerton, a partner at Huntington Underwriting Ltd.

A foothold in China: the path to a large-scale mutual insurance sector may be a long one, as China's mutual insurance sector takes its early steps

Second, in part because of the mutualization of risk resulting from the loss-sharing, the arrangement operates as a system with some of the same kinds of interdependencies that arise in a multilateral netting arrangement.