Page 8 - Life Assurance

read of risks" over which to average out
good years with bad years.

Political risks are also beyond (out of) the
control of the insured, since losses cannot be
estimated accurately or measured. For example
many war risks are such that one cannot
measure the degree to which losses stem from a
war or from some other peril. Also, this peril
often brings about catastrophic losses. Again,
since no two wars are alike and their
occurrences cannot be predicted there is no way
of scientifically calculating a premium.

To the extent that risks are uninsurable, the
management of a business firm, or an individual
will employ one or more of the other methods of
handling risks.

1/1/2 Requirements of an insurable risks .

From the standpoint of the insurer an
insurable risk must meet the following
requirements:

1- There must be a sufficient number of
risks of a similar class, being insured so as to
produce an average of loss experience :

This is because insurance is based on
the operation of the Law of large numbers. It
would not be possible to administer an

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