Uninsurable risk is a situation in which no insurer is willing to provide coverage. The following are several situations that can give rise to uninsurable 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.