A growing trend is for larger companies to manage risks with less insurance by applying portfolio management techniques and utilizing sophisticated financial contracts. These companies have been regarding their risks of potentially insurable losses as a “risk portfolio.” Managers use computer software to determine what portion of the firm’s potential losses should be absorbed by shareholders and what portion should be transferred to insurers. Insurance companies have responded by offering “portfolio insurance.” Instead of insuring specific risks, such as the risk of fire or fraud, these insurance companies now insure the net risk exposure that companies confront. 

Which of the factors accounting for financial intermediation best explain the existence of insurance companies?