Not every risk is insurable. In practice, only those risks that meet the following requirements are considered insurable risks:
- The losses must be measurable
- The losses must not be catastrophic risk for the insurer
- The losses must be fortuitous (uncertain)
- There must be a large number of homogeneous exposure units. The frequency and magnitude of future losses must be mathematically predictable, ie. can be calculated through mathematical formula.
- The premium charged must be reasonable
- The existence of insurable interest
- The losses must not violate any law - eg. cannot buy insurance for your car speeding fine by the police.
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