#risk

2 public notes

Insurance pools uncertain losses

Insurance combines premiums from many policyholders to help cover specified losses suffered by some of them. In a simplified pool, 1,000 people each paying ₹1,000 create ₹10 lakh. That money must support covered claims and the insurer's other obligations, rather than become a personal savings balance.

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diversification

Diversification changes which risks dominate

Diversification spreads exposure across assets that do not all respond in the same way. Owning shares in ten companies can reduce dependence on one company's results. But if all ten rely on the same industry, a single industry shock can still hurt much of the portfolio together.

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