An underwriter is reviewing a commercial insurance application from a property developer. The developer is requesting coverage for two specific scenarios: the intentional, planned demolition of an aging office building to clear space for new construction, and the potential destruction of their entire real estate portfolio across the country due to a declared nuclear war.
Which of the following required elements of an ideally insurable risk are VIOLATED by the developer's requested coverages? (Select all that apply)
- The loss must be accidental and unintentional.Cevap
- The loss must not be catastrophic in nature to the insurer.Cevap
- CThe exposure must involve a pure risk rather than a speculative risk.
- DThe risk must be managed through risk transfer rather than risk retention.
Cevap
The requested coverages violate the requirements that losses must be accidental and unintentional (violated by the planned demolition) and that losses must not be catastrophic in nature (violated by the nuclear war).
For a risk to be ideally insurable, it must meet specific criteria. The planned demolition of a building violates the requirement that losses must be accidental, unintentional, and due to chance. Furthermore, a declared nuclear war violates the requirement that the loss must not be catastrophic, as it would cause massive, simultaneous losses that an insurer could not financially support.
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Elements of an Ideally Insurable Risk