What is the definition of distressed risks?

The correct choice, which defines distressed risks, highlights characteristics that can lead to unfavorable underwriting conditions for insurance products. Distressed risks are typically associated with a history of frequent or severe losses, making them less desirable for standard insurance providers. Insurers may view these risks as presenting a higher likelihood of claims, resulting in increased scrutiny when considering coverage.

In contrast, the other definitions do not fully capture the essence of what distressed risks entail. For instance, high premiums may arise from various risk categories, but they do not inherently indicate that the risks themselves are distressed. Moreover, newly emerging risks might be high in uncertainty but do not fit the typical profile of distressed risks. Lastly, low-risk profiles are generally accepted by insurers, which is the opposite of what distressed risks represent, as they are more likely to be turned away from standard coverage options due to their problematic nature.