If an insured wants to increase the sum insured beyond their insurer's limit, how can the insurer underwrite it?

When an insured wishes to increase the sum insured beyond the insurer's specified limit, purchasing reinsurance is a viable solution for the insurer. Reinsurance allows an insurance company to transfer a portion of its risk to another insurer, effectively increasing its capacity to underwrite larger sums.

By purchasing reinsurance, the primary insurer can spread the risk associated with higher coverage amounts across multiple parties, ensuring that even in the event of a significant claim, the financial burden does not rest solely on one entity. This enables insurers to meet the needs of the insured for higher limits while maintaining their own financial stability.

The other approaches, while relevant to risk management or underwriting strategies, do not directly address the specific situation of increasing the sum insured beyond the insurer's limit. Coinsurance, for example, involves sharing risk between multiple insurers but does not inherently raise the limit of coverage offered by a single insurer. Similarly, applying average relates to ensuring that the insured amount is adequate in relation to actual values, and increasing the deductible shifts some of the risk to the insured rather than enhancing coverage limits.