A regional property insurer is reviewing a coverage application from a coastal municipality. The city is requesting a specialized policy that would pay for the emergency evacuation of all 500,000 residents and the replacement of all civic infrastructure in the event of a direct hit by a Category 5 hurricane. The insurer declines the application, reasoning that a single severe storm would simultaneously trigger a massive, region-wide payout that could bankrupt the insurance company.
Based on the insurer's reasoning, which element of an ideally insurable risk does this proposed exposure primarily violate?
- Losses must not be catastrophic in nature.Cevap
- BThe situation must present a pure risk rather than a speculative risk.
- CThe event must be caused by an insurable peril rather than a physical hazard.
- DThe exposure must be managed through risk retention instead of risk transfer.
Cevap
The proposed policy violates the element that losses must not be catastrophic in nature.
For a risk to be ideally insurable, it must not be subject to a catastrophic loss. Insurers rely on the premise that only a small percentage of insured exposures will suffer a loss at the same time. Because a Category 5 hurricane would cause simultaneous, massive destruction across a concentrated geographic area, it threatens the insurer's financial solvency and violates the non-catastrophic element of insurable risk.
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Anahtar Kavram
Elements of Insurable Risk - Non-catastrophic Losses