Page 7 - Life Assurance
P. 7
Note that the uninsurable risks are to be
considered generally uninsurable from the
viewpoint of a private insurer. For example,
governmental agencies insure political risks
such as those arising from war (ocean marine
risks during wartime and occurrence restrictions
export credit insurance and investment guarantees).
There is the possibility that ways and means
may be found for private agencies to assume
risks or unpredictable in nature, or to assume
speculative risks. Nevertheless, it seems likely
that such a development will be slow.
To illustrate (explain) the reasons for
uninsurable risks, let us, for example, use
market risks. Suppose a firm wishes to insure
that the price of its product will not fall more
than 10 percent, during the insurance year. Such
a risk is subject to the catastrophic loss, if the
loss was possible to all of the firms’ products in
a depression. Further, the losses are not subject
to advance calculation in the free competitive
market, where past experience is an inadequate
guide to the future. Hence (thus), the insurer
would have no realistic basis for computing
(calculating) a premium.
Furthermore, in times of rising prices, few
would be interested in the coverage; and in
times of falling prices, no insurer could afford to
take on the risk. The insurer could get no
7 Lif11/life/life08
considered generally uninsurable from the
viewpoint of a private insurer. For example,
governmental agencies insure political risks
such as those arising from war (ocean marine
risks during wartime and occurrence restrictions
export credit insurance and investment guarantees).
There is the possibility that ways and means
may be found for private agencies to assume
risks or unpredictable in nature, or to assume
speculative risks. Nevertheless, it seems likely
that such a development will be slow.
To illustrate (explain) the reasons for
uninsurable risks, let us, for example, use
market risks. Suppose a firm wishes to insure
that the price of its product will not fall more
than 10 percent, during the insurance year. Such
a risk is subject to the catastrophic loss, if the
loss was possible to all of the firms’ products in
a depression. Further, the losses are not subject
to advance calculation in the free competitive
market, where past experience is an inadequate
guide to the future. Hence (thus), the insurer
would have no realistic basis for computing
(calculating) a premium.
Furthermore, in times of rising prices, few
would be interested in the coverage; and in
times of falling prices, no insurer could afford to
take on the risk. The insurer could get no
7 Lif11/life/life08
