This chapter describes the risks that insurance companies face and explains how the companies manage those risks. Consumers face a myriad of risks in their lives, such as the risk of accidents, illness, premature death, and longevity; these risks can be mitigated by transferring them to an insurance company. Insurance companies are then able to create large diversified pools of risks and use sophisticated techniques to reduce the residual risks to a very low level. The main risks faced by insurance companies are broadly categorized into insurance, financial, and operational risks. Risk management can be applied at both the individual risk level and at the aggregate level. Over time, insurance companies have developed expertise and sophisticated techniques to understand and adequately manage the risks they face.