Uninsurable risk

Uninsurable risk is a situation in which no insurer is willing to provide coverage. Taking on an uninsurable risk would otherwise put an insurer at risk of very large payouts that could threaten its solvency. The following are situations that can give rise to such risk:

  • The amount of risk is too difficult to quantify

  • The cost of the insurance would be too great

  • Incidents causing losses are expected to be quite frequent

  • Providing coverage is illegal, such as reimbursing for an illegal act

When a risk is uninsurable, a company either restructures its business to avoid the risk or creates a reserve to cover any losses that may arise.

Related Courses

Business Insurance Fundamentals 
Enterprise Risk Management