Is there a reason why pure risk events, like a hurricane or earthquake, could be bundled into a more general risk portfolio?

Is there a reason why pure risk events, like a hurricane or earthquake, could be bundled into a more general risk portfolio?


A) No, pure risks have too devastating an effect.

B) Yes, since they are negatively correlated with other risk events.

C) No, they are too highly correlated with other risk events.

D) Yes, because an insurer can ask a very high premium for including it in the general risk portfolio


Answer: B

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