Free California Property and Casualty Exam Flashcards

A warehouse fire is a pure risk: the only possible outcomes are a loss or no loss, and the loss is accidental, so an insurer can price it and pool it across many similar buildings. A failed product launch is a speculative risk: the same venture could produce a profit or a loss, and the result depends on business decisions and market conditions the insured controls. Insurers accept pure risks and leave speculative ones to strategy, diversification, or retention.