Question 17 What is the main reason that an insurer is able to assume such a large amount of risk without a large probability of insolvency (financial distress)? o Because of the aggregate loss becomes more predictable with a large group of similar exposure units, much of the risk is reduced State regulators generally prevent insurers from accepting certain risks (potential insured's) which have proven "too risky O Federal insurance funds back individual insurers and will help finance particularly large doses With the reduction of moral hazard associated with the purchase of insurance, losses become more predictable