Which scenario represents an insurable risk?

The scenario that represents an insurable risk is natural disasters. Insurable risks are typically those that are measurable, predictable, and have the potential for financial loss that can be compensated through insurance. Natural disasters, such as floods, earthquakes, hurricanes, or wildfires, fit this definition because they can be quantified in terms of potential damage and loss, and they are events that can be statistically evaluated based on historical data.

Insurance products exist to manage these risks, allowing individuals and businesses to protect themselves financially against the significant costs associated with such events. Insurers can assess the likelihood and impact of natural disasters, allowing them to develop policies that cover specific occurrences and provide the necessary financial support when a loss occurs.

Other scenarios like a high-crime area, property with a history of theft, or loss of income due to business closure may present challenges when considering them as insurable risks. These situations involve subjective elements or may not meet the criteria of being random, measurable, or based on a large enough pool of data that insurers can evaluate, making them less straightforward in terms of coverage. Thus, natural disasters stand out as a clear example of an insurable risk within the context of insurance.