Is There a Reason Why Pure Risk Events, Like a Hurricane

question 40

Multiple Choice

Is there a reason why pure risk events, like a hurricane or earthquake, could be bundled into a more general risk portfolio?

• A) No, pure risks have too devastating an effect.
• B) Yes, since they are negatively correlated with other risk events.
• C) No, they are too highly correlated with other risk events.
• D) Yes, because an insurer can ask a very high premium for including it in the general risk portfolio.

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Definitions:

Safeguarding Tendencies

Psychological mechanisms that individuals employ to protect their self-esteem or ego from threats and anxiety.

Neurotic Trends

Patterns of thought, emotion, and behavior that are maladaptive and often stem from unresolved psychological conflicts.

Basic Anxiety

According to Karen Horney, the feeling of being isolated and helpless in a potentially hostile world, fundamentally shaping personality.

Moving Away

The action or process of leaving one's current location to settle in a different place, which can involve emotional, social, and logistical changes.