What is the primary advantage to insurers of using reinsurance?

The primary advantage to insurers of using reinsurance lies in their ability to share and mitigate overall risk exposure. Reinsurance serves as a risk management tool that allows insurers to transfer part of their risk to another party, essentially a reinsurer. This is particularly important in the insurance industry where significant claims can arise from a single event, potentially leading to large financial losses for the primary insurer.

By utilizing reinsurance, insurers can underwrite larger policies, spread their risk across multiple entities, and stabilize their financial performance. In the case of unfavorable underwriting results or catastrophic events, the financial impact on the primary insurer is reduced, enabling them to maintain stability and solvency. This shared risk not only helps in protecting the insurer's capital but also enhances their capacity to take on new business while managing their overall risk portfolio effectively.

The other options do not align with the primary motivation behind reinsurance. Retaining all risks would actually increase exposure rather than mitigate it, while maximizing profits by cutting costs doesn't directly address the role of reinsurance in risk management. Lastly, establishing direct relationships with clients does not pertain to the purpose of reinsurance; rather, it focuses on the customer relationship aspect of insurance.