Reinsurance for independent contractors typically covers a primary insurance business’s potential losses from large-scale catastrophic events. Allowing them to transfer a portion of their risk to a reinsurer, protecting against significant financial burdens from a single major claim like a natural disaster, major accident, or a large number of claims arising from a single event, effectively acting as “insurance for insurance companies”. In other words, it reduces the net liability on individual risks and catastrophe protection from large or multiple losses.