What is the primary means of transferring the risk of loss?

The primary means of transferring the risk of loss is through insurance. Insurance operates on the principle of risk distribution, where individuals or businesses pay premiums to an insurance company. In return, the insurance company assumes the financial burden of certain risks, such as property damage, liability, or health costs. This transfer of risk allows policyholders to protect themselves against potential large losses by sharing that risk with a broader pool of insured individuals or entities.

While hedging involves using financial instruments to offset potential losses in investments, it does not provide the same broad protection for various types of risks as insurance does. Investing typically involves putting money into assets with the expectation of earning a return, rather than addressing risk transfer. Portfolio management focuses on the selection and management of investments to optimize returns relative to risk, rather than transferring risk. Therefore, insurance is uniquely positioned as the primary vehicle for transferring the risk of loss effectively, making it the correct answer.