What type of risk is considered speculative risk?

Speculative risk refers to situations where there is a possibility of both gain and loss, making these risks uninsurable in the traditional sense. Unlike pure risk, which involves situations that can only result in a loss (such as theft or natural disasters), speculative risks can lead to either a positive outcome (profit) or a negative outcome (loss). This dual nature is what classifies speculative risk as uninsurable. For example, investing in the stock market is a classic case of speculative risk; the investor might earn a profit if the stock price rises or may suffer a loss if the price falls. The inherent uncertainty surrounding speculative risks prevents insurance companies from being able to effectively cover them, as the potential for gain complicates the assessment of risk and the necessary premium structure.