The Characteristics of an Ideally Insurable Risk

1.There should be a large number of independent, homogeneous loss exposures subject to the same peril.
2.The loss exposure should be definite in time, place, cause and amount.
3.The loss exposure should be calculable and the resulting premium should be economically feasible.
4.The loss should result from an accidental hazard not under the control of the insured.

To be insurable, the occurrence of a peril must be accidental.  It is only possible to insure against perils that are certain to occur if there is uncertaintyon the timing of the occurrence or the amount of the possible loss.2

An insurance contractis called an aleatory contract because there is an element of chance that is very much present in an insurance transaction.  Several centuries ago, some kinds of insurance contracts were held to be illegal because they were considered as gambling contracts. For example life insurance was not authorized in some countries because the Catholic Churchwas considering it as a gambling act on the life of the people.  Remember also that until the 16th century the Catholic Church prohibited usury.  The essence of gambling is the creation of risk.  Insurance does not create the risk  but only transfers an existing risk to an insurer.