Which markets are established to cover unusually large or poor risks?

Residual markets are specifically designed to provide coverage for risks that are considered unusually large or have significant challenges in obtaining insurance through traditional means. These markets are established as a safety net to ensure that individuals or businesses that might otherwise be uninsurable still have access to necessary insurance coverage.

Residual markets often cater to high-risk individuals or entities, such as those with poor claims histories or those operating in hazardous industries where standard insurers are reluctant to provide coverage. By pooling these risks within the residual market, insurers can manage the overall risk exposure while still offering protection to those who might otherwise be left without options. This ensures that the insurance needs of underserved populations are met, effectively balancing the market.

The other types of markets do not serve this specific purpose. Alternative markets might offer non-traditional options but do not focus exclusively on high-risk or difficult-to-insure scenarios. Standard markets refer to conventional insurance providers that operate under normal underwriting guidelines, which typically do not accommodate high-risk clients. Restricted markets imply limitations on coverage or availability under specific conditions, which does not align with the broader provision of coverage for unusually large or poor risks as seen in residual markets.