Which term describes the practice of spreading risk among multiple insurers?

The term that best describes the practice of spreading risk among multiple insurers is reinsurance. Reinsurance involves one insurance company purchasing insurance from another insurer to reduce the risk they carry. By doing this, insurers can manage their exposure to large losses by transferring a portion of their risk to other insurers. This allows them to maintain stability and solvency while still underwriting new policies.

Risk pooling refers to a method used by insurers to group multiple individuals or entities together to spread risk within one insurance plan instead of involving multiple insurers. Risk sharing typically involves the sharing of risk among insurers but does not directly refer to the practice of insurers spreading their risk through purchasing "insurance for themselves." Diversification generally applies to investment strategies—not specifically to insurance risk distribution among insurers—but can be a broader investment principle where a mix of asset types reduces overall risk.