Final answer:
The entity that assumes a risk in exchange for premiums is the insurance company or insurer. Their role is to protect individuals from financial loss by compensating those who experience covered events, while managing the risk of moral hazard.
Step-by-step explanation:
The individual who assumes a risk in return for payment of a premium in the context of insurance is referred to as the insurance company or insurer. The primary function of insurance is as a method of protecting a person from financial loss. Policyholders pay regular premiums to the insurance entity, which in turn provides compensation to those policy members who suffer significant financial damage from an event that is covered by the insurance policy. This process of receiving and paying out money is designed to spread the risk among many policyholders, thereby minimizing the impact on any single individual. However, the concept of moral hazard plays a role in insurance markets, as individuals with insurance may be less incentivized to prevent the occurrence of the insured event.