What does the term 'pure risk' predominantly involve?

The term 'pure risk' primarily involves exposure to loss without any potential for profit. In the context of risk management and insurance, pure risk refers to situations where only the possibility of loss exists, without any chance of financial gain. This type of risk is typically insurable because it is straightforward; the insurer can estimate the likelihood and potential cost of the loss occurring.

For example, risks associated with natural disasters, accidents, or theft fall under pure risk, as these events can lead to financial losses but do not provide any opportunity for the insured to gain financially from them. In contrast, other types of risks, such as speculative risks related to investments or entrepreneurial ventures, do have the potential for both gains and losses, which distinguishes them from pure risks. Therefore, when evaluating the nature of pure risk, it is clear that it is solely about potential losses rather than any prospect of profit.