Which type of risk requires very high coverage limits for insurance?

High Capacity Risk is characterized by the need for very high coverage limits due to the significant potential for large losses. These risks generally involve exposure to substantial financial repercussions, which could arise from factors like extensive properties, high-value inventories, or operations that have a substantial impact on the economy. Insurers typically require higher coverage limits for these types of risks because the potential payouts in the event of a loss can far exceed standard policy limits.

This type of risk is particularly relevant in certain industries, such as oil and gas, large commercial real estate, or major manufacturing, where the stakes are elevated and loss events can result in considerable financial implications. In these scenarios, standard coverage might not adequately protect against the potential for catastrophic losses, necessitating specialized coverage with higher limits that can adequately address the unique exposure profile involved.