What is one of the purposes of reinsurance?

Reinsurance serves multiple important purposes in the insurance industry, making the choice indicating "all of the above" the most comprehensive and accurate. One significant purpose of reinsurance is to spread risk, particularly when it comes to catastrophic losses. By transferring some of the risks associated with large claims to other insurers, primary insurers can protect themselves from the overwhelming financial impact of a significant event, such as a natural disaster.

Additionally, reinsurance helps insurers manage their risk portfolios more effectively. It does not eliminate risk entirely, but rather allows insurers to diversify and lessen the severity of potential losses. This is essential for maintaining financial stability and ensuring that they can meet their obligations to policyholders.

While some aspects of avoiding risk or providing coverage for uninsurable risks are valid concepts within certain contexts of insurance, they do not encapsulate the primary function of reinsurance as effectively as the risk-spreading characteristic does. Therefore, recognizing that reinsurance aims to spread risk, along with its additional roles in risk management, supports the conclusion that all the options provided contribute to the overarching purposes of reinsurance in different contexts.