What is a defining feature of speculative risks?

Speculative risks are characterized by the possibility of both loss and gain, which distinguishes them from other types of risks. This means that an individual or business could experience a financial gain or a financial loss depending on the outcome of a specific situation or decision. For instance, investments in the stock market are considered speculative because they carry the risk of losing money, but they also have the potential for significant returns.

In contrast, other classifications of risk, such as pure risks, involve situations where there is only the possibility of loss without any opportunity for gain. Additionally, speculative risks are not solely tied to criminal activity, nor are they always insurable. Insurers typically focus on pure risks for underwriting purposes because they can better manage the predictable aspects of loss, while speculative risks present an uncertain outcome that can make them more difficult to insure. Thus, the defining feature of speculative risks is their dual nature of potential gain and loss.