General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which characteristic would make a risk difficult to insure because it threatens many insureds at the same time?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
An ideally insurable risk must be non-catastrophic in the sense that not many insureds suffer losses at once. If a single event strikes a large portion of the pool simultaneously — an epidemic or a disaster — the insurer's reserves are overwhelmed and the law of large numbers loses its force, because the losses are no longer independent. Insurers manage this through reinsurance and careful exposure limits.
Why the other options are wrong
- B) Fortuitous, accidental losses are exactly what insurance is designed to cover; this is a favorable characteristic.
- C) A large number of homogeneous exposures strengthens prediction and is a desirable feature of insurable risk.
- D) Definite, measurable losses are a requirement of insurability, not an obstacle.
Memory hook
Catastrophe = everyone in the pool gets wet in the same storm. Independent losses are the insurer's best friend.