What characteristic distinguishes Distressed Risks from other types of risks?

Distressed Risks are primarily distinguished by their high underwriting problems, which is the reason this answer is correct. These risks typically encompass scenarios that present a greater likelihood of loss or require deeper analysis and scrutiny during the underwriting process. This unpredictability stems from various factors such as poor claims history, unstable financial conditions, or significant operational challenges that make standard underwriting practices insufficient.

Underwriters must engage in a more comprehensive assessment of Distressed Risks, often necessitating specialized knowledge and expertise to properly evaluate and price these risks. The aim is to adequately compensate for the increased potential for loss, making the underwriting process more complex compared to other types of risks.

In contrast, the other characteristics associated with different types of risks highlight their more straightforward nature. For instance, risks that are easily evaluated or require low coverage limits don't generally fall into the same high-stakes category as Distressed Risks. Likewise, the notion that risks are often error-free contradicts the very essence of Distressed Risks, which inherently involve nuances and potential issues that could lead to significant errors if not thoroughly assessed.