CII Certificate in Insurance - General Insurance Business (IF2) Practice Test

Pure risks refer to situations that can result in only a loss or no loss—they do not present the opportunity for a financial gain. In the context of insurance, pure risks are typically associated with events or situations that can lead to insurable losses, such as property damage, liability claims, or personal injuries.

Investment losses fall into a different category known as speculative risks. Speculative risks include scenarios where there is a chance of both gain and loss, such as investing in stocks or real estate. In these cases, individuals or businesses may experience profits as well as losses, which is fundamentally different from the nature of pure risks, which can only lead to losses or the absence of losses.

Thus, the distinction lies in the potential outcomes: pure risks involve losses only, while speculative risks incorporate both potential gain and loss, making investment losses a type of risk that is not typically covered by pure risk.