An efficient allocation of risk occurs when those most willing to bear risk insure those who are least willing to bear risk.

Question

Quizplus · Accepted Answer

In an efficient allocation of risk, those who are willing to bear risk and have a low probability of loss insure those who are less willing to bear risk and have a higher probability of loss. This leads to a fair distribution of risk and ensures that those who are most vulnerable are protected.

An Efficient Allocation of Risk Occurs When Those Most Willing