Uninsurable Risk

Uninsurable risk refers to types of risk that insurance companies cannot realistically cover or will not cover. Examples of the former are regulatory and political risk which are, by definition, difficult to render via an insurance contract. Uninsurable risk came to the fore in 2020 and 2021 because of Covid-19 as loss or damage suffered by effect of the pandemic – pandemic risk – was deemed to be uninsurable. Pre-existing health conditions will often be deemed uninsurable, particularly if they are terminal and the insurance company calculates the likelihood of collecting sufficient insurance premiums prior to death is remote. Risk is not necessarily uninsurable because of high loss probability: it is as much because risk cannot be adequately modelled because of high levels of uncertainty.