What does the phrase "spreading the risk" mean with regards to risk assessment of natural hazards/disasters?
I came across the phrase in the World Economic Forum document, A vision for managing natural disaster risk. A quote from the document:
There are various options for risk management – avoidance, reduction, transfer or retention. Risk transfer is the underlying tenet for insurance markets, passing a liability onto another party (spreading the risk). Risk pooling is vital to the recovery of individuals, firms and economies following a natural disaster.
More specifically, what does the phrase mean with regards to insurance and aid, to reduce vulnerability to a disaster/hazard event?