Which of the following best defines pure risk?

Pure risk is defined as a situation where there is only the potential for loss or no loss, without any possibility for a gain. This concept is fundamental in insurance because it relates directly to insurable risks that insurance policies typically cover. Examples include risks such as theft, fire, or natural disasters. In these situations, the worst outcome is a financial loss, while the best scenario is that no loss occurs at all.

The emphasis on "no chance for gain" distinguishes pure risk from other types of risk, such as speculative risks, which involve opportunities for profit alongside the potential for loss. Other choices reflect various financial or market scenarios that are not constrained to the binary of loss/no loss; instead, they involve investment or market dynamics that include possible gains. Therefore, the correct definition centers on the essential nature of pure risk as strictly about loss scenarios without the potential for financial reward.