An insurance company estimates its objective risk for 10,000 exposures at 10 percent. Assuming the probability of loss

Question

Question: An insurance company estimates its objective risk for 10,000 exposures at 10 percent. Assuming the probability of loss remains the same, what happen to the objective risk if the number of exposures were to increase 1 million?

Options:

1.  It would decrease to 1 percent
2.  It would decrease to 5 percent
3.  It would remain the same
4.  It would increase to 20 percent

Answer 1

1. It would decrease to 1 percent

An insurance company estimates its objective risk for 10,000 exposures at 10 percent. Assuming the probability of loss remains the same, the objective risk would decrease to 1 percent if the number of exposures were to increase 1 million.