What is defined as the reduction of uncertainty regarding the occurrence of a loss?

The correct answer is risk management. Risk management involves identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. In the context of reducing uncertainty regarding losses, risk management encompasses various strategies that organizations or individuals implement to understand potential risks and address them proactively.

In this process, one might adopt different techniques, including avoidance, reduction, transfer, or acceptance, to manage risk effectively. It is particularly focused on creating a comprehensive approach to dealing with risks, thus leading to a better understanding and control of potential losses.

Mitigation refers to efforts specifically aimed at reducing the severity or impact of losses rather than uncertainty itself. Insurance acts as a financial safety net that transfers the risk from an individual or organization to an insurer but does not necessarily reduce uncertainty. Risk avoidance involves entirely preventing a risk from occurring but does not address the broader context of understanding and managing various risks that could lead to loss.