INSR & Risk Mgt 441
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What is risk Management?
An ongoing process of identifying exposures, measuring them against the firm's loss withstanding capabilities and the handling of risk with appropriate control, transfer and financing techniques.
What is Insurance??
Equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium.
Can be thought of as a guaranteed and known small loss to prevent a larger possibly devasting loss.
What is an Indemnity Contract ?
retoration to the victim of a loss by payment, repair or replacement.
What are the 5 parts of Risk Management?
- Risk identification
- Risk Analysis
- Risk Control
- Risk Financing
- Risk Administration
What are the 5 part of risk management?
- Risk Identification
- RIsk Analysis
- Risk control
- Risk financing
- Risk administration
Classes of Risk?
What are some logical classifation of risk identification?
- Human Resources
- Net Income
Example of Product Risk
Chinese dry wall. Unpredictable exposure.
What are some key factors in risk analysis?
- Frequency Vs. Severity
- Statistics and Probabilities
- Expected Losses
- Net Present Value
- Cost of Risk
What are some ways to control risk?
- Segregation: Separation, duplication
- Physical Transfer
Methods of Risk FNAN: Retention
Acquisition of funds from within the organization to finance retained risk.
Active vs. Passive
Methods of Risk FNAN: Transfer
Contractual or other arrangement where losses are financed from outside the organization.
Methods of Risk FNAN: Insurance Transfer
a relatively small know cost substitutes for the potential (unknown) of a large cost.
What is the difference between active and passive retention??
Active: current expenses, unfunded reserves, funded reserves, use of capital markets, group & single-parent captives, risk retention & risk purchasing Groups.
Passive Retention: Failure to identify, failure to act, forgetting to act
Effective risk management programs utilize at least one ______ and one _________ for each identificed exposure.
One risk Control Technique, One risk Financing technique.
Low Frequency / Low severity
Low Frequency/ High Severity
High Frequency/ Low Severity
High Frequency / High Severity
What are the 5 forms of ownership?
Corporation. Partnership. Joint ventures. Limited Liability companies. Unicorporated Associations.
What are the 16 lines of commercial insurance?
- Commercial property insurance
- Business income insurance
- Crime Insurance
- Equipment breakdown (boiler and machinery) I
- Inland & ocean marine I.
- Commercial general liability insurance
- Commercial auto I.
- Business owners I.
- Farm I.
- Workers Comp & Emp liab. I
- Excess & umbrella liab. I.
- Professional liab. I.
- Aircraft I.
- Environmental I.
- Surety bonds.
What is the difference b/t Monoline and Package commercial insr. policies.
What is the ISO commercial package policy program?? What are the components?
- Policy that covers 2 or more lines of business by combining ISO's commercial lines coverage parts.
- Components: Common policy declarations, common policy conditions and two or more coverage parts.
What are the 6 conditions appilicable to all coverage parts unless a coverage part states otherwise?
Cancellation. Changes. Examination of your books and records. Inspections and surveys. Premiums. Transfer of your rights and duties under this policy.
Each coverage part consists of the following elements:
- A declaration page that pertains only to that coverage part.
- One or more coverage forms which contain insuring agreements, exclusions, and other policy provisions.
- Applicaple endorsments, which modify the terms of the coverage form to fit an insured's needs.
Rating fundamentals in determining commercial insr. premiums.
- Specific and class rates. Program called sage commercial line manual. Rating: base rate that can be modified by the company.
- Package modification factors
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