For a loss to be insurable, what must be true about the losses?

For a loss to be considered insurable, it must be calculable. This means that the insurance company needs to be able to estimate the likelihood of the loss occurring and its financial impact. Calculability allows insurers to set appropriate premiums and create insurance policies that are financially viable.

When losses are calculable, the insurance provider can use historical data and statistical models to determine the frequency and severity of losses, thus allowing them to balance risk and profitability. While it is beneficial for the losses to also be random, as randomness helps avoid predictable losses, the primary criterion for insurability hinges on the ability to quantify the risk associated with those losses.

In contrast, losses that are speculative involve uncertainties that an insurance company prefers to avoid. A high degree of risk can make insuring a loss impractical if the losses are unpredictable or if it leads to unmanageable exposure for the insurer.