What distinguishes pure risk from other types of risk?

Pure risk is characterized by the possibility of loss without the potential for gain or profit. This type of risk typically involves scenarios where there is only the chance of experiencing a negative event, such as accidents, natural disasters, or illness.

In contrast, other types of risk, such as speculative risk, can lead to both losses and gains. For example, investing in the stock market is a speculative risk where one might lose money or make a profit.

Focusing on the nature of pure risk, it is purely about exposure to loss — there is no upside involved. This is one reason why pure risk is often more straightforward when it comes to insurance; insurers can assess and quantify the potential losses from pure risks more effectively, leading to the development of specific policies aimed at mitigating those losses.

Moreover, pure risk is also insurable, which further distinguishes it from speculative risks that cannot be insured in the same way, as insurers typically do not provide coverage for potential gains or investments. Thus, the defining aspect of pure risk lies in its lack of profitability potential, making it a unique category within the broader context of risk management.