Which type of risk has the possibility for gain or loss and is not insurable?

Speculative risk refers to situations that have the potential for both gain and loss, making them inherently unpredictable. In the context of insurance, pure risks—such as natural disasters or health-related events—are those that can only result in loss and are, therefore, insurable. In contrast, speculative risks, which might include investments in the stock market or starting a new business, introduce a chance for profit alongside the potential for loss; these scenarios cannot be insured because they involve uncertainties that go beyond mere loss prevention.

Insurance operates on the principle of managing pure risks, where the outcomes are more certain and can be pooled and calculated for risk management purposes. Since speculative risks involve choices and uncertainties that can yield positive results, underwriting such risks does not fit within the traditional insurance framework. Thus, while pure risk is insurable, speculative risk is not. This distinction is vital for understanding how insurance works in protecting against financial loss versus other kinds of financial opportunities or gambles.