1. A small property insurance company concentrated its underwriting efforts in one city in Oklahoma. When tornadoes damaged a large number of structures in the city, the insurer did not have adequate reserves to pay all of the losses and became insolvent. Which requirement of an insurable risk was violated in this scenario?

I. there must be a large number of exposure units.

II. the loss should not be catastrophic.

A. I

B. II

C. Both I and II

D. Neither I or II.

2. How many of the following techniques do property insurers us to cope with risks that have catastrophic potential?

I. Reinsurance

II. Avoiding a geographic concentration of risks

A. I

B. II

C. Both I and II

D. Neither I or II