Which risk type is characterized by the chance of gain or loss and is generally not insurable?

The correct answer is speculative risk, which is characterized by the chance of both gain and loss. This type of risk involves uncertainty where the outcome could result in a positive benefit or a negative consequence. Common examples of speculative risk include investments in stocks or starting a new business; these actions can lead to financial gain or loss depending on various market conditions and management decisions.

Speculative risk is generally not insurable because insurance is designed to protect against pure risks—those that present the possibility of only loss, such as property damage or liability claims. Insurers typically avoid covering speculative risks since they involve a chance of profitable outcomes, which can lead to moral hazard and create unpredictable financial obligations for insurers.

In contrast, pure risk involves scenarios where only losses are possible, making it suitable for insurance coverage. Self-funding refers to organizations managing their financial risks by setting aside their funds rather than purchasing insurance. The transfer of risk involves shifting the responsibility of risk to another party, typically through insurance contracts. These concepts differentiate from speculative risk, as they deal primarily with ways to manage or mitigate predictable losses rather than opportunities for gain.