A contractor signs a contract requiring a subcontractor to assume liability for injuries to the subcontractor's own employees. The contractor has shifted a financial risk to the subcontractor without buying insurance. This illustrates:

Why A is correct

Risk transfer can be accomplished through insurance or through contractual devices such as hold-harmless agreements, indemnity clauses, and waivers. Here the contractor shifts the financial burden of defined losses to the subcontractor by contract rather than by purchasing a policy. Both methods move the financial consequence of loss away from one party to another; the contract is simply a noninsurance transfer mechanism.

Why the other options are wrong

• B) The contractor still performs the project; no avoidance of the underlying activity occurred.
• C) Retention means keeping the risk; the contract moves it away from the contractor.
• D) The contract changes who bears a loss, not how often losses occur.

Memory hook

Transfer without a policy = contracts and indemnity clauses doing the heavy lifting.