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Question: Insurance or risk transfer in best used in risk management when the frequency of loss is _______ and the severity of loss is ________.

Options:

  1.  Low, high
  2.  High, low
  3.  Low, low
  4.  High, high
  5.  Certain, speculative

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1. Low, high

Insurance or risk transfer in best used in risk management when the frequency of loss is low and the severity of loss is high.


More information:

Risk transfer is a risk management method where the potential loss is shifted from one party to a any third party.

Risk should be transfer when the frequency of loss is low and severity is high.

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