Which factors are considered in the assessment of risk?

The assessment of risk involves considering the severity, frequency, and susceptibility of loss, which are essential components in understanding potential challenges and exposures associated with insurable risks.

Severity refers to the potential impact or extent of a loss when it occurs. Higher severity indicates that the consequences of a risk event could be significant, leading to substantial financial loss or damage.

Frequency examines how often a risk event may occur. Understanding the likelihood of incidents helps insurers predict potential claims and quantify their exposure over time.

Susceptibility of loss relates to how vulnerable an entity or situation is to the risks under consideration. This encompasses factors that may increase the likelihood of a loss occurring or enhance its severity, making it a critical aspect for insurers to evaluate.

Together, these factors provide a comprehensive understanding of risk, assisting in the development of appropriate insurance solutions and risk management strategies for clients.