What is one major characteristic that makes a risk insurable?

A major characteristic that makes a risk insurable is that it can be aggregated and assessed as a loss over time. This means that the risk must be quantifiable and statistically predictable, which allows insurers to determine how much coverage they can provide and how to price that coverage accordingly. Insurers rely on historical data and statistical models to understand the frequency and severity of losses associated with a specific risk.

When risks can be pooled together, insurers can spread the financial impact across many policyholders, which helps stabilize premiums and ensures that enough funds are available to cover losses. This aggregation and assessment capability is critical, as it enables insurers to manage their risk exposure effectively and maintain financial stability while providing coverage to insured parties.

In contrast, risks that are entirely eliminable may not be suitable for insurance because they don’t present a financial loss that needs to be pooled. Systemic risks may affect entire markets or economies simultaneously, making them difficult to insure due to their unpredictable nature. Lastly, risks that are unique to a specific industry might not have a sufficient pool of insureds to allow for effective risk assessment and aggregation, also limiting insurability.