Not all risk may be transferable to an insurance firm. There are certain identifiable risks that most insurance firms consider uninsurable. Those risks identified in your risk management profile that can be transferred are determined by what are known as Requisites for Insurability.

• The first is that the number of susceptible entities to a particular risk is sizeable. This, basically, means that the insurance firm wants to make sure that there are enough particular entities concerned with the same risk to make the coverage worthwhile. For instance, if an insurance firm is looking to write homeowner’s policies, they want to make sure there are enough houses to make that particular risk worthwhile to them.
• The second requisite is that any potential losses need to be accidental. The potential losses cannot be predetermine or premeditated. The key is that the losses have to a matter of fate, of pure chance. The insurance firm looks at this risk in a historical fashion, creating a model based on previous occurrences and likelihood.
• The next category of risk requisite is that the possibility that a particular disaster or risk will manifest must be pretty close to zero. The insurance firm’s first duty, like that of your small business, is to remain solvent and profitable. The possibility that a certain disaster will likely, or absolutely, occur, is an unacceptable risk and not likely to be insured against. Generally, when an insurer takes on a pool of risk, they understand that there will be a small percentage of those in the pool that will have their risks manifest. That remains a sound business model for them as the large number in the pool will be able to more than cover the losses of the fractional few.
• Insurers break down disastrous loss as occurring under only two circumstances. One is when the large group is exposed to several catastrophes that are on the magnitude of natural disasters, a collapsed economy, open rebellion or war. The second category would be when the large group have all bee affected by only one catastrophic occurrence such as the September 11.
• Another is that the risks will definitely happen and losses are guaranteed. When losses have been defined as definite, such as the totaling of an automobile in a crash, then dollar values can be attached to the loss occurring within define parameters and can be used for future predictability studies and models.

So, when a small business owner just assumes that he will be able to get coverage for any manner of risk he may face, he needs to be aware of these Requisites for Insurability and include this in their risk management assessments and planning.