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

Question

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

Answer 1

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.

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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.