What risk means here
In insurance, risk usually means an uncertain event that may cause financial loss. The focus is measurability, pooling, and whether a contract can transfer that exposure.
- Separate pure risk (loss / no loss) from speculative risk (gain or loss)
- Insurance mainly addresses insurable pure risk—not guaranteed investment outcomes
Risk management toolbox
Transfer is only one tool. Identify and measure first, then choose avoidance, reduction, retention or insurance—and be ready to explain why.
Common conditions of insurable risk
Insurable risks typically involve many similar units, definable and measurable losses, fortuity, manageable correlation, and economically viable premiums. Treat these as a filter, not a rote list.
Study tips
- Contrast fire damage, equity losses and intentional damage as insurable vs not
- After each section, write one sentence: “Insurance does not solve X”