Which category of risk is characterized by low frequency and high impact?

The correct answer is that the category of risk characterized by low frequency and high impact is typically classified as "Insure." This category involves risks that do not occur frequently but, when they do, have significant consequences. Because of their potential to cause substantial damage or loss, it is prudent for organizations or individuals to purchase insurance to protect against these risks.

Insurance serves to transfer the financial burden of such high-impact events to an insurance provider, alleviating the risk bearer from the full financial repercussions associated with infrequent yet severe incidents. For example, catastrophic events like natural disasters or major liability claims fall into this category, and having insurance coverage helps to mitigate the financial impact of these occurrences.

In contrast, managing risks tends to involve ongoing strategies to minimize their impact or likelihood, which is more applicable to risks that are both high frequency and low impact. Accepting risks suggests that an individual or organization is willing to bear the financial consequences themselves, which is more suited to manageable risks rather than those that are infrequent yet severe. Ignoring risks is typically not advisable, especially for high-impact situations, as this could lead to severe negative consequences if they do occur. Therefore, insuring these low-frequency, high-impact risks is the most appropriate approach.