Definition: Finite risk insurance is a risk transfer mechanism adopted by an entity wherein the insurer assumes a part of the specified risks related to investment, credit, timing etc of the insured.

Description: In a finite risk insurance mechanism, the liability of the insured is funded by the insurer and is spread over a protracted period of time. The risk assessment by the insurer is conservative in nature. The present value of the conservative loss estimate is taken as a basis for premium. Here the insured gets the share of the investment profits generated from the premium amount of the insured if the loss suffered by the insured is favorable or the premiums paid is sufficient to cover the loss as well as the solvency requirements of the insurer. A finite risk insurance can be taken by an entity with robust financials, low loss profile, unique risks etc.