What term describes the shifting of risk to another party such as an insurer?

The term that describes the shifting of risk to another party, such as an insurer, is "Transfer." In the context of risk management, transferring risk involves shifting the financial burden of potential losses from an individual or business to another party—most commonly an insurance company. By entering into an insurance contract, individuals or organizations can pay a premium to the insurer, who in return takes on the responsibility of covering specified risks. This allows the original party to mitigate their own financial exposure to those risks.

The other options pertain to different risk management strategies. Retention involves keeping the risk and assuming responsibility for any potential losses. Diversification entails spreading risk across different assets or investments to reduce the impact of a single point of failure. Avoidance means eliminating the risk altogether, which is not applicable in this context where the focus is on transferring the risk rather than avoiding it entirely. Thus, "Transfer" is the correct choice, as it specifically indicates the action of shifting risk away to another party.