ARM 402

Copyright 4.7

All types of original expression - words/music/sculpture/video/lines of code/literature/graphic art/choreography/songs. Essential elements of copyright are creation, ownership, and duration.

Driver Licensing 5.10

Drivers license, classification for vehicles, clean driving record

limited form of hold harmless agreement

contractor indemnifies only the portion of the claim that they are directly responsible for - building owner has limited transfer of loss so may absorb some of the claims

intermediate form of hold-harmless agreement

contractor will indemnify building owner for claims that come from the contractor's negligence and some of the building owner's negligence

General liability is mainly for bodyily injury and property damage - this provision supports the principle that insurable loss exposure is:

definite --- in time (NOT pure risks)

Difference between risk tolerance/capacity and risk appetite

tolerance/capacity = amount of risk an organization CAN handle appetite = amount of risk the org WANTS to take on

nonverbal communication (ethos)

tone of voice, level of eye contact, and body language

Organization can be held legally liable because of one of the following 3 major liability causes of loss:

torts, contracts, and statutes

Fleet managers and technology 5.12

training and supervising vehicle operators, identifying unsafe driving behaviors, and implementing appropriate measures to address driver safety deficiencies - done by vehicle monitoring - used to identify areas where drivers need training

4 types of noninsurance transfers for risk control 3.4

1. Leasing. 2. Contracting for services. 3. A waiver of exculpatory clause 4. Disclaimer of warranties. 1. Leasing : sudden loss is that can arise from property ownership do not exist for a lessee occupying the property. These losses include accidental damage to the property and liability to third parties resulting from hazards on the property. A lessee does not normally bear responsibility for such losses. However, too important exceptions apply: the lease obligates the lessee to return the property to the lessor in the same condition it was received or if the lessee is at fault in causing harm to others. 2. Contracting for services.: an individual organization that performs a particular activity in general, how old primarily responsible for any losses caused by that activity, an organization can transfer this loss exposure by contracting with another organization to perform the activity. This not insurance transfer method is called contracting for services or simply subcontracting. Even though the transferor need not be an independent contractor, and the transferee need not be a subcontractor. Liability, loss exposure is associated with an activity or not easily transferred, especially those that involve harm to third parties. Because quartz seek to compensate those who are injured, they favor, restricting the rule exempting the person who hires an independent contractor (the principal) From liability for the independent contractors torts. So they have establish some exceptions to the rule: 1. The principal is directly liable for negligence in selecting the contractor, give me directions, or failing to stop any unnecessary dangerous practices of which the principal was aware. 2. The principal's responsibility for certain duties to be performed safely cannot be delegated to another party. The owner of an apartment building for example, cannot transfer to a contractor. It's duty is to keep common areas safe. 3. If the subcontracted work is inherently dangerous to others (such as blessing or excavating near a public highway), the principle that hired a contractor can be held liable for third-party injury, caused by the contractors negligence. Waiver of exculpatory clause: An individual organization can relinquish it's Rice to see you another party through a waiver. An exculpatory clause (exculpatory agreement) is similar to a waiver. Both waivers and exculpatory clauses can function as effective risk control mechanisms. Waivers or Exculpatory clause is in various contracts, can transfer responsibility for liability, loss exposure. For example, in a particular jurisdiction, the applicable law allows a real property lessee (tenant) to Sue a lessor (landlord) for failing to maintain premises, suitable for people to live in. However, if the lease agreement between the two contains a provision stating that the lessee waves, it's rights to sue the lessor for this reason, the lessor no longer faces that exposure. Disclaimer of warranties: Sellers of property often assert disclaimers of warranties. A disclaimer in a sales contract may deny any express warranties made during the property sale. It may also deny implied warranties, such as the implied warranty of fitness for a particular purpose (or that the seller is aware of the particular purpose for which the buyer will use the property, and that the property is suitable for that purpose.) And the implied warranty of merchantability (or that the property is suitable for the purpose for which most buyers use it)

capital market 7.10

A financial market in which long-term securities are traded

association captive 3.20

A group captive sponsored by an association.

Residual Market Loading 2.11

An amount charged to make up for losses in a state-sponsored plan to insure high-risk exposures, such as an assigned risk plan for auto insurance.

Package Policy

Good for companies like exporters who have no foreign permanent place of business

US based company w/ controlled master program

Has one program based in the US that covers all operations

Risk Criteria 3.10

Information used as a basis for measuring the significance of a risk.

Waiver and Exculpatory Clause 3.5

Limitation in place to restrict ability to file a suit

loss limit in retrospective rating plan formula

is applied on an individual loss basis to limit losses included in the formula

Contingent Surplus Note

(only for insurers) Surplus notes [unsecured debt instrument w/ characteristics of both conventional equity and debt securities and is classified as policyholders' surplus rather than as a liability on the insurer's statutory balance sheet] that have been designed so that an insurer, at its option, can immediately obtain funds by issuing the notes at a pre-agreed rate of interest.

Contract is enforceable if: 6.5

- Agreement (offer and acceptance) - Consideration: each party gives up something of value - money for activity (usually) - Capacity to contract: legal age, sober, and sane - Legal purpose: can't be illegal

Copyright Duration 4.9

- As long as the creator is alive + 70 years (after 1978) - Joint: as long as the creators are alive + 70 years after the last person's death - For hire/anonymous works: 95 years from publication or 120 years from creation (whichever is shorter)

2 requirements for trademark

- Be destinctive - Be the first to use it/introduce it to the stream of commerce

Risk Control for Copyrights 4.9

- Notice (watermarking) - Registration (w/in 3 months of publication or before an infringement occurs) - Restrictive covenants (kinda like an NDA, no compete - contract dictating how to use it) - Responses to anticipated defenses (laches - waiting too long to assert infringement -- the infringers can pay to use the intellectual property -- fair use is legal as of 2015) - Licensing agreements (specifies how the property can be used)

3 stages of civil law case

- Preliminary: pleadings and appointments of a hearing judge - Evidence: hearing judge takes evidence and prepares a written summary - Decision: presiding judge decides the case based on the record provided by the hearing judge, counsels' briefs, and arguments

4 classifications of IT operations risks

- Security: data breach could result in unauthorized access to, use of, or alteration of an organization's information. - Availability: Systems could be inaccessible because of a malicious attack; a software failure; or a natural disaster or event, such as a tornado or fire. This period of inaccessibility would include any restoration period. - Performance: systems, applications, or personnel won't perform at the level required to help the organization reach its goals - Compliance: processes for handling data could fail to meet certain regulatory or business insurance policy requirements

Aspects of successful cargo transportation

- Suitable to vehicle (animals, gas, etc) - Proper loading - Safeguards against inherent vice (ability of cargo to destroy itself - glass safety stored, ice cream @ correct temps)

Risk control measures for patent loss exposures 4.19

- Notice - Licensing agreements - Restrictive covenants - Freedom-to-operate search (reviewing previous to make sure nobody did it already - to protect against willful infringement check w/ an intellectual property attorney and that will protect against willful infringement) Notice When a patent application is pending, the invention should be marked as patent pending. Once the patent is issued, the invention should be marked with a patent number. If the invention is marked with a patent number or a patent pending a presumption of notice exists. This is important when Dealing with infringement because it means that in infringer cannot claim that infringement was unintentional. Will full or intentional in Frenchman entitles the patent owner to Treble damages (three times the amount the judge or jury finds to be owed) and attorneys fees. If an invention is not marked, the infringer can claim that that infringement was unintentional, in which case the damages may be limited to a reasonable royalty or the provable loss. Licensing Patents are awesome sold or license to others who can manufacturer the invention. The sale agreement or licensing agreement should include language that addresses the risk of liability for infringement claims. Often when licensing or buying someone else's patent the acquire six to transfer the rest to the seller or licensor. The language is similar to the hold harmless language found in many contracts. Restrictive covenants Some of the most technical demanding methods of protecting patents concern work for hire, hire to invent, and confidentialities agreements with employees. Attorneys usually draw up work for hire or hire to invent employment contracts. When the reason for the employment is a specific project work for hire or invention, hired and vent. The contract must include additional safeguards. These agreements or restrictive covenants must be clear about the rights, employee retains, and the circumstances under which they will be retained. The employment contract should define the intellectual property, copyright, patent or trade secret, covered by the agreement. The agreement should require full disclosure of any discoveries, inventions, improvements, or ideas, weather, patentable, or not that the employee makes or conceives during the work hours, using materials, fun, our facilities supplied by the employer. Agreement should specify weather prior inventions are included in the agreement and shit include confidentialities and non-disclosure language. The agreement may also include a provision that prohibits employers from using patents or trade secrets belonging to others in the course of the employees employment. In the event of an infringement claim against employer, this provision would help show that the employer was not willfully in fringing. These agreement should be used with all new hires who will have access to intellectual property. Current employee should also be asked to sign such an agreement if their position warrants it. Freedom to operate search In addition to protecting against infringement of their own patents organizations, need to make sure that they don't infringe on other parents. One wrist control measure to prevent infringement allegations is to perform a freedom to operate search. This is a review of prior art and current patent applications to ensure that an invention currently under development does not infringe on an existing patent. If the search reveals a pending pattern of interest, the inventor must assist The potential effects that the pending patent is allowed could have on invention under development. One way to protect against will fill infringement obligations is to get a reason opinion from an intellectual property attorney that in invention does not infringe on existing patents. While the inventor may still be found to be infringing, such infringement would not be willful. This is important in assessing damages. Trade secrets Did you know that Coca-Cola company does not have a patent on the formula of its world famous soft drink? Patent protection, offers just 20 years of safeguarding intellectual property, but good risk control measures can protect a trade secret indefinitely. Unlike a patent trade, secret status is bestowed within a registration process. An invention attains the status of a trade secret when an organization takes reasonable steps to ensure confidentiality of information about the invention. A trade secret can be anything that gives its owners and advantage over competitors, and that it is treated as secret.

Risk Control for Trademarks 4.15

- Notice: (R) or TM symbols - Registration: has to be registered and marked - Searches/watches: identify if anyone else has a trademark with the same attributes - Licensing agreements - Restrictive covenants - Enforcement of rights (cease and desist in a timely manner - showing intent to sue if use doesn't discontinue) Notice The trademark owner can obtain additional protection under the law by registering the trademark with the US PTO. Once registered on the principal register, the mark should be shown with the symbol. @ to convey its status. Until register, the product name should be followed by TM (or the service name should be followed by SM) failure to show the symbols can hinder the owners action against an infringer. And claiming trademark ownership is also possible by filing an intent to use registration with the US PTO. Registration The symbol (R @) can be used only the trademark has been registered with the US PTO. If the Mark has been registered as a symbol is not used than much of the protection that would normally be gained by registration is lost Registration has two advantages number one it creates a presumption, even if it is rebuttable, that the party doing the registering is the owner. #2 and registration creates a nationwide notice not just noticed in the local market Because registered marks have a shorter protection. Then copyrights the risk management professionals should create a list of the registered marks to diary the marks 10 year renewal dates. If the owner failure. If the marks owner fails to continuously use the mark, then someone else me claimant was abandoned, is a Court agrees to Mark's owner, loses the ability to prevent the other party from using it. Searches and watches Before I trademark registration is attempted and periodically there after a search, should be done to determine whether someone else has a similar trademark or service mark or has applied for one a professional search and watch firm can do this. These firms can alert subscribers to potential conflicting trademark applications, and registrations when they are published for opposition and cancellation perposes throughout the world. Licensing agreement L licensing agreement should be carefully drafted before allowing anyone else to use in organizations Mark these agreement, shit address, quality control issues. If the Mark will be used on a product other than the trademark owners, additionally, the agreement should limit the liability of the organization that owns the mark if the licensee fails to meet quality standards Restrictive covenants Restrictive covenants can protect trade marks much as they protect, copyrights by agreeing to a restrictive covenant a second party that infringes upon the trademark rights of an organization will find itself asphalt and the trademark owner armed with additional protection The organization can assert that per the restrictive covenant the other party acknowledged the existence of the trademark light, and promise, not to infringe upon it. That promise is broken and allows a breach of agreement action to be brought against the infringing party. The type and amount of damages may have even been agreed-upon in advance, or the party is May agree to binding arbitration, thereby avoiding the expense of litigation. Each of these agreements within a restrictive covenant can simplify an organizations efforts to prevent further infringement, and to recover from an existing infringement Enforcement of rights Infringers should be dealt with in a timely manner with a cease-and-desist letter or notification of intent to sell. Any applications by others for a similar Mark should be handled by filing oppositions to the Mark with the USPTO. If they infringement continues or the USPTO fails to act more aggressive action may be required council may need to be returned to assert available legal remedies

Vehicle Selection 5.7

- goal to transport cargo and people safely - consider: size, type, and weight of cargo - also consider: cargo potential to shift, cargo center of gravity, number of passengers, geographic area where it'll be used

3 factors that make something a trade secret

- secret from the public -economic value to the holder is due to secrecy -holder is deliberate in its attempt to maintain secrecy (determination that an invention is a trade secret is often made by the courts)

Vehicle fleet systems have four common features that must be analyzed to prevent losses 5.3

-Components -Purpose -Environment -Life cycle

Questions That Help Develop a Strategic Plan

-Is the plan suitable? --- appropriateness for the organization and marketplace, the likelihood that personnel will support the strategy, and changes needed to fully implement -Is the plan financially feasible? --- Resource allocation, cost, and overall impact (and cost of delaying other plans) -Is the plan acceptable? --- Executives should determine whether the strategy will yield an acceptable overall return on investment (including loss in other areas of opportunity because you can't do everything) -What risks are associated with the plan? --- may present obstacles to success and determining how much risk the organization can accept

Characteristics of a successful fleet system

-Reliable -Safe and well maintained -Efficient -Environmentally neutral -Lawful

In a majority of countries - legal systems have 2 categories:

-common law -civil law

Types of strategic risk factors

-competition and innovation risk: changing software and customers not liking it and switching to another platform, and positive is that customers might like the new operating system and demand increases -liquidity and financial risk: (-)liquidity is low if 2 restaurants in the same city close, (+)increase demand for real estate allows the buildings to be sold if need be -acquisition and economic risk: (-)insurance company can't integrate w/ a new software they bought, (+)if they can integrate they may have lower costs for customers -marketing risk: (-)clothing line isn't popular and won't sell, (+)new customers jump on board -foreign economic risk: (-)new SUV doesn't sell because economy is in a tough spot, (+)more customers buy the brand and customer base expands -procurement risk: (-)new supplier might not deliver on time, (+)lower cost of delivery -regulatory risk: (-)studies may show new medication to be unhealthy, (+)if medication works and they make money they can sustain loss in the future

Benefit of surplus notes

-increase an insurer's assets without increasing its liabilities -treatment as equity (policyholders' surplus) on an insurer's statutory balance sheet allows an insurer to increase its capacity to sell business -Contingent surplus notes can immediately obtain funds by issuing notes at an agreed-upon rate of interest. An insurer can use the funds to bolster its surplus following a loss

Disadvantages of Contingent Capital Arrangements

-interest on repayment -ownership dilution (decreases shareholder % of ownership as company making the arrangement gets a piece of the pie) -new "owners" may not know the business/situation and may make recovery harder

Driver Training 5.9

-may train internally or outsource -classroom/independent study/behind-the-wheel/computer simulation -topics: traffic laws, cargo hazards, accidents, safe operations, and road practice

3 criteria of a copyright 4.8

1) original work, it cannot be copied from another source. 2)fixed in a tangible medium of expression that is permanently recorded (paper/videotape/audiotape/digital media), 3)work has some degree of creativity no set roll governs what constitutes enough creativity. Wants these three criteria or met the work automatically obtains basic copyright protection in the US and all countries honoring the Berne convention.

Prouty's 3 categories of loss severity

1) slight- losses that can be retained easily 2) significant- part of the loss must be transferred 3) severe- the organization's survival depends on the transfer of loss

5 phases lifecycle of a fleet 5.6

1. Conceptual (evaluate the types of delivery vehicles required, along with possible routes and schedules) 2. Engineering (select reliable delivery vehicles, select and train operators, finalize routes and delivery schedules, plan appropriate vehicle maintenance, and educate operators and others on accident procedures) 3. Production (purchase the delivery fleet vehicles) 4. Operational (implement and monitor measures that control the overall cost of risk (insurance costs, safety measures, and administrative costs) attributable to the organization's fleet operations) 5. Disposal (eliminate old vehicles unable to legally fulfill the purposes and attributes of the fleet because of age, technological obsolescence, or other reasons and replace them with vehicles that better meet the organization's transportation needs; train, retire, or reassign employees no longer qualified to operate the vehicles)

Insurance securitization

1. org transferring risk 2. investor taking risk on 3.special purpose vehicle

Trademark

10 years (renewals available)

Monitoring patent applications

18 months after the patent is filed others can comment on whether it is unique or not - process takes about 3 years to complete

Mortgage-backed securities

1970, when the Government National Mortgage Association (GNMA) began to sell securities that were backed by mortgage loans

Trademarked company

A brand that has exclusive legal protection for both its brand name and its design (protection so that only the owning brand/company can profit off the reputation of said company/brand)

Group Captive 3.20

A captive insurer owned by a group of companies, usually operating similar businesses, rather than a single parent. An association captive is a group captive, that is sponsored by an association many organizations considered the opportunity to obtain insurance through an association captive as one of the benefits of being a member of the association.

Single-parent captive (pure captive) 3.19

A captive insurer owned by one company that insures all or part of the loss exposures of that company or its subsidiaries.

hazard 6.13

A condition that increases the frequency of severity of a loss

Unenforceable Contract 6.6

A contract that is a valid contract but that because of a technical defect cannot be enforced.

Valid Contract 6.6

A contract that meets all of the requirements to be enforceable

Void contract 6.6

A contract that meets all of the requirements to be enforceable

Voidable Contract 6.6

A contract that one of the parties can reject (avoid) based on some circumstances surrounding it's execution

protected cell company (PCC) 3.21

A corporate entity separated into cells so that each participating company owns an entire cell but only a portion of the overall company Is a group captive, in which each participant pays premiums and receives reimbursement for its losses from as well as credit for underwriting, profits and investment income, similar to a rent a captive. Each participant is assumed that their participants will not be able to access its capital and surplus in the event, that the other participants become insolvent. Each participant is also assured That third-party creditors cannot access. It's assets. There's protection does not necessarily exist with a rent a captive structure.

Derivative basics

A derivative is a financial contract that derives its value from the performance of another asset, such as a commodity, or that can derive its value from the yells on another assets, or the level of an index, such as the standard, and Poors 500 stock index The three major categories of derivatives used in financial risk management are forwards/futures contracts Options Swaps

Special purpose vehicle SPV 7.10

A facility established for the purpose of purchasing income-producing assets from an organization, holding title to them, and then using those assets to collateralize securities that will be sold to investors.

Special purpose vehicle 5.8

A facility established for the purpose of purchasing income-producing assets from an organization, holding title to them, and then using those assets to collateralize securities that will be sold to investors. (receives cash from an organization in exchange for the promise to pay any losses that occur. The SPV also obtains funds from investors, which are then used to pay for potential losses. The investors will either receive interest on their investments if there are no losses or lose some or all of the investments if losses do occur.)---- generally used for catastrophic insurable risk (hurricanes, earthquakes, etc)

Insurance-linked securities (ILSs)

A financial instrument whose value is primarily driven by insurance and/or reinsurance loss events.

Hedging

A financial transaction in which one asset is held to offset the risk associated with another asset.

private international law6.8

A law that involves disputes between individuals or corporations in different countries.

Specific Performance

A legal action to compel a party to carry out the terms of a contract.

Civil Law - Legal System6.7

A legal system based on a written code of laws - judge is civil servant who finds the correct legislative provision w/in written code of statutes and applies based on facts (little interpretation and opinion)

civil law

A legal system based on a written code of laws - protects rights and provides remedies for breaches of duty

Common law

A legal system based on custom and court rulings (used in the UK and their commonwealth countries)

capacity ratio (premium-to-surplus ratio) 2.23

A leverage ratio that indicates an insurer's financial strength by relating net written premiums to policyholders' surplus. For accounting purposes, state insurance regulations, mandate that the acquisition expenses for each insurance policy sold be recognized as of the time the policy is sold. In contrast, premiums are recognized as a revenue as they are earned over the policies term. When an insurance recognizes expenses immediately in revenue, gradually, its policyholders surplus decreases, and its capacity ratio increases. Each measures moves in the wrong direction to satisfy the regulatory constraints on rapid premium growth.

Umbrella Liability Policy 2.15

A liability policy that provides excess coverage above underlying policies and may also provide coverage not available in the underlying policies, subject to a self-insured retention. An umbrella liability policy usually applies in excess of an organizations, primary general liability, auto liability, and employers liability coverage. In addition, an umbrella policy may apply in excess of other liability, coverages, such as watercraft, liability, professional, liability, and employee benefits liability. Basic functions of umbrella, liability, policies - Provide access limits above the each occurrence, limits of the insureds underline policies,

Correlation

A measure of the relationship between two variables. Strength of the relationship -1 to 1, which is the correlation coefficient value.

General Damages 6.10

A monetary award to compensate a victim for losses, such as pain and suffering, that do not involve specific measurable expenses.

Admitted versus not admitted insurance 2.17

A multinational company that relies heavily on admitted insurance for its coverage in foreign countries, is likely following a decentralized approach to cover its international exposures Relying on locally written coverage has several consequences, such as the policy, being written in the language of the country, in which it was sold and in compliance with a local laws.

Patent 4.16

A patent is a legal protection and a right granted by the government that gives its owner the ability to control who makes, uses, sells, or imports for sale his or her invention for a limited period

Compensatory Damages 6.10

A payment awarded by a Court to reimburse a victim for actual harm

Punitive damages (exemplary damages) 6.10

A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need not bear any relation to a party's actual damages.

Large-line capacity 2.20

A primary insurer's ability to provide a large amount of insurance under a single policy

Retrospective rating plan 3.12

A rating plan that adjusts the insured's premium for the current policy period based on the insured's loss experience during the current period; paid losses or incurred losses may be used to determine loss experience. Organizations that want to retain risk in connection with their insurance programs often consider a retrospective rating plan. The direct link between losses and premium is a major incentive for an insured with a retrospective reading plan to control its losses

Retrocession 2.22

A reinsurance agreement whereby one reinsurer (the retrocedent) transfers all or part of the reinsurance risk it has assumed or will assume to another reinsurer (the retrocessionaire).

Risk Avoidance

A risk control technique that involves ceasing or never undertaking an activity so that the possibility of a future loss occurring from that activity is eliminated.

Diversification

A risk control technique that spreads loss exposures over numerous projects, products, markets, or regions

System safety 5.3

A safety engineering technique also used as an approach to accident causation that considers the mutual effects of the interrelated elements of a system on one another throughout the system's life cycle.

The Basel Accords (Basel I)

A set of recommended "best practices" designed to help countries avoid banking and financial crises. The accords emphasize capital requirements, supervisory review, and information disclosure. (after 1988 international bank failures including US savings and loan crisis)

Common Law System

A system of law based on tradition, precedent, and custom. When law courts interpret common law, they do so with regard to these characteristics. The judge interprets the facts of a case, examines precedents (prior judicial rulings in similar cases), and makes a decision based on the facts in the current case. Precedents are guides, not rigid frameworks for all decisions. This system tends to be fact-intensive, relying on the judge's reasoning for a final decision. (England and most of the former British colonial countries, including Australia, Canada, India, and the U.S., use the common law system)

Per occurrence excess of loss reinsurance 2.29

A type of excess of loss reinsurance that applies the attachment point and reinsurance limit to the total losses arising from a single event affecting one or more of the primary insurer's policies.

Per policy excess of loss reinsurance 2.29

A type of excess of loss reinsurance that applies the attachment point and the reinsurance limit separately to each insurance policy issued by the primary insurer regardless of the number of losses occurring under each policy.

Copyright Ownership 4.8

A work's creator owns the copyright to the work Unless the work is a work made as part of their job (employer owns), they commissioned it (owned by the commissioning party), or if the author sells the copyright Three. Exceptions of copyright ownership.: When the work was created in the course of the authors, employment. In that case, the employer owns the copyright. When the work was created on commission. If the author acted as an independent contractor, when creating the work under a written agreement, with the commissioning party, the commissioning party owns the copyright. When the author sells the copyright The first two exceptions to the copyright ownership rule works, created in the course of the authors employment and works created on commission are often referred to as work for hire. As an example of the work for hire is when an author is commissioned by a movie studio to write a script for a movie Because ownership of a copyright creates value for an organization. Copyright ownership must be determined to help establish the value exposed to loss, and to insure that the organization owns what it believes it owns.

Diversification tip

Add another sector outside your standard (generally have oil companies in your portfolio - add a discount retailer as they're outside that line of business)

Effective meetings

Agenda, objectives, anticipated questions, knowledge of subject, invite the right people. Structure should be strong opening, succinct supporting material, and a powerful conclusion. End of meeting should be a plan to execute objectives. Use of visual aids limited but impactful. Start with an attention grabbing fact. Present just enough facts and figures to make it believable.

Securities 8.7

All of the investments, including stocks, bonds, mutual funds, options, and commodities, that are traded. Written instruments that represent money or other property.

Risk Based Capital (risk capital)

Amount of capital an insurer needs to support its operations, given the insurer's risk characteristics. A method developed by the National Association of Insurance Commissioners (NAIC) that establishes a minimum amount of capital that an insurer needs to support its overall ongoing business operations based on the risk-based capital formula. [capital required for financial cushion against unexpected losses] The level of capital required to provide a cushion against unexpected loss of economic value at a financial institution

Swaps

An agreement between two organizations to exchange payments, based on changes in the value of an asset, yield, or index over a specific. Swaps are commonly used to manage interest rate and currency rate of exchange risk two different parties will swap for example, interest payment streams on a bond or similar asset. One parties bond may offer a fixed interest rate, while the other offers, a variable rate for business reasons, each party prefers a type of interest payment held by the other party so they swap fixed rate payments for floating rate payments. The variable floating rate is typically tied to an index of interest rates that banks charge each other for loans

Risk change 3.10

An amount over and above the expected loss component of the premium to compensate their insurer for taking the rest that losses may be higher than expected.

Ceding Commission 2.22

An amount paid by the reinsurer to the primary insurer to cover part or all of the primary insurer's policy acquisition expenses and other costs

Self-insured retention (SIR) 2.15

An amount that is deducted from claims that are payable under an umbrella liability policy and that are not covered at all by any primary policy.

Framework

An approach to project planning and execution in which portions of the project are divided by requirements or problem statements and addressed separately, but in a way that will integrate.

Standby credit facility

An arrangement in which a bank or another financial institution agrees to provide a loan to an organization in the event the organization suffers a loss. -- -interest rate and principal repayment schedule are known in advance, costs a fee paid to the facility (similar to an insurance policy - often used in conjunction w/ insurance) --- set interest rate and length of LOAN

rent-a-captive 3.21

An arrangement under which an organization rents capital from a captive, to which it pays premiums and receives reimbursement for its losses. The organization also receives credit for underwriting profit and investment income, so the organization benefits from using a captive insurer, but it's not required to invest its own capital. Each insured keeps its own premium and loss account so no risk shifting or distribution occurs among the members of a rental captive. The rent a captive organization charges a fee for it services. Rent a captive provides a means for an organization to form a captive insurer quickly without tying up.

futures contract 8.4

An exchange traded agreement to buy or sell a commodity or security at future date at a price that is fixed at the time of the agreement

Professional reinsurer 2.21

An insurer whose primary business purpose is serving other insurers reinsurance needs.

Policyholder surplus 2.23

And insures assets minus liabilities, which represents it's not worth Assets- liabilities = net worth

Contract of Adhesion 6.12

Any contract in which one party must either accept the agreement as written by the other party or reject it.

Logos

Appeal to logic

Risk Assessment Process

Approach: 1) List risks (+ and -) 2) Use risk map to see consequences 3) ID 5 highest priority risks Answer these questions: -What is the risk tolerance and appetite? -What are we doing currently to treat the risk? -Is what we're doing keeping the risk at an acceptable level? -What else can we do to keep the risk at an acceptable level? -Do we move forward with the decision or activity?

Elements/benefits of effective risk-appetite statements

Articulating the activities the firm is willing to engage in and level of risk it's willing to take on Providing a framework for formulating strategic and tactical business decisions Engaging internal and external stakeholders in a discussion of strategic risk Creating a consistent plan for risk decision making Promoting a shared understanding of risk Limiting excessive risk taking Deciding on appropriate capital and resource allocation Creating a means to measure, monitor, and adjust strategies to account for risk

Berne Convention 4.8

Automatic copyright as am original item is created (registering helps enforce, copyright is automatic)

5 common ways risk managers treat risk

Avoidance, modification, transfer, retention, or (for opportunities) exploitation.

Risk control measures for trade, secret loss exposures 4.23

Because no formal process exists for designating some thing as a trade secret, the risk control measure associated with trade secret loss exposure focuses on maintaining secrecy. Risk control measures that can be used to in sure information confidentiality: Disclose that information, only to those employees who need to know the information to perform their jobs Require a sign in or similar security, measure to gain access to the area where the secret information is used are maintained Control any documentation regarding the secret by using a safe a confidential stamp, or a burn bag a bag used to burn documents that are meant to be kept secrets in Lou of using a shredder Require employees to sign a restrictive covenant in the form of a nondisclosure or confidentiality agreement A confidentiality agreement between an employer and employee should defined the nature in limits of the information to be covered by the agreement, as well as what efforts employee must make to protect the confidentialities of the information A nondisclosure agreement can be signed between parties, who want to collaborate on a project such an agreement would contain language similar to the confidentialities agreement between employer and employee

Advantage of large deductible plan

Benefit from cash flow available on the retained loss reserves

Control Objectives for Information and Related Technology

COBIT - framework that would enable organizations to communicate about their IT-related needs, strategies, and governance (not only identifies gaps between the actions of operations and the controls put in place by risk management, but also it helps identify opportunities for improvement in those two areas)

Criminal law

Codes of behavior related to the protection of property and individual safety. Body of law - defines offenses; regulates the investigating, charging, and trying of accused offenders; and establishes punishments for convicted offenders. DIFFERENT: Unlike criminal law, under which the government decides whether to press charges and prosecute on society's behalf, in civil law, an individual victim can file charges

Experience Rating (diff btw retrospective) 3.14

Considers losses and adjusts as needed - from previous periods. RETROSPECTIVE - the losses from the current period are taken into consideration.

Licensing agreements 4.11

Copyright owners can grant permission to others to use their copyrighted material. The permission usually takes the form of a licensing agreement, because the licensor copyright owners usually specifies the exact material to be used, the type of you, so loud, and the duration of the license, the licensor controls the loss exposure. An honest difference of opinion can exist about the extent of a license granted by the copyright owner to a party who paid to use the work, careful drafting of the license agreement can prevent this defense from expanding the use of a copyright owners work beyond the scope intended

Guaranteed cost rating premium

Cost doesn't change

When trade secrets are stolen/leaked 4.22

Courts may determine that stealer can't use and may have to pay monetary damages Several loss exposures are associated with trade secrets. The most obvious is that another entity, my honestly re-create, an organization, secret invention, process, or method, and get it patented. In such an instance, the organization that was relying on trade, secret protection alone would lose the protection. Similarly, the trade secret might be stolen or simply disclose as a result of negligence, if the secret of stolen, then the court could decide whether it was, in fact, a trade secret, and if so preventative from using it and requiring the thief to pay monetary damages.

Self-insured retention (SIR) 2.9

Coverage provided after the Insured has exceeded a predetermined amount of loss.

Drop-down coverage 2.15

Coverage provided by many umbrella liability policies for (1) claims not covered at all by the underlying policies and (2) claims that are not covered by an underlying policy only because the underlying policy's aggregate limits have been depleted.

Elements of Copyright 4.7

Creation/ownership/duration

Project backlog

Delayed upgrades to systems/equipment - causing other departments to put off their projects ---frameworks helps prevent this (ID issues w/ projects and solve)

Reasons for valuing, intellectual property 4.6

Even intellectual property that has been protected through copyright, trademark patent or trade secret protection is still vulnerable to infringement by third parties, particularly as technology makes it increasingly easy for intellectual property to be stored, transferred, and transmitted around the world. When an organization is face with unauthorized use of intellectual property. It must quantify the resulting damage in order to recover. The properties monetary value is a necessary part of such quantification and any related litigation. As with tangible commodity in organization can generate revenue with it's intellectual property by selling it or licensing excuse. And actually appraise piece of intellectual property maximizes it's profit potential. Acquiring intellectual property is frequently the primary goal in mergers and acquisitions. And entities worth in such transactions may be largely determined by the true value of its intellectual property. The intellectual properties value may be affected by the extent to which the target organization has sold or licensed it how well the property is protected, and the nature of the target organizations ownership of the property, all of which could affect the merger of acquisition If an organization pursues financing , securitization, or other means of acquiring capital, the value of it's intellectual property, which may be substantial could be a source of collateral. Because it is considered an intangible assets, intellectual properties, accounting and taxation treatment differs from other types of assets. The value of a piece of intellectual property, maybe used to determine the amount of risk management resources, that should be devoted to it.

Systems and Sub-systems

Failure at any level creates risk at other levels - system failures degrade subsystem environment, increasing strain on subsystems and increasing likelihood of failures/accidents

gross combined vehicle weight rating

GCVWR, indicates the maximum weight a vehicle can handle with an attached trailer at full capacity

insurance pool 3.22

Grouping together of similar exposure units. Also called risk pool and risk class. financing workers compensation losses, and the pool will process and pay workers compensation claims on behalf of its members A pool is made up of member organizations. Each insured member of the pool, contributes premium based on its loss exposures, and an exchange the pool pays for each insurance cover losses. Ensamples the members also contribute capital. Pools can be organized in a variety of ways, including as a stock insurer or as a not-for-profit, unincorporated association, governed by its members however, the structure of most pulls less formal than that of a group captive. A pool operates like in insure by collecting premiums, paying losses, purchasing excess insurance or reinsurance and providing other services, such as risk control consulting. Pools that she was saving through economies of sale in administration, claims handling, and the purchase of excess insurance or reinsurance.

Risk tolerance measurement

Has quantitative attribute (unlike appetite that is qualitative) and has high and low boundaries and treatment triggers that indicate when a corrective action must be taken to prevent risk appetite thresholds from being breached

Modifying likelihood of contractual liability 6.14

Have a contract lawyer review (before they're signed) Examples of such contractor, oil, agreements includes lease, purchase, orders, sales contracts, shipping agreements, and hold harmless agreements

Contracting for services 3.5

Having another organization do the activity that causes risk so they are the ones that absorb that risk liability. (liable for choosing the contractor, liability for basic safety measures, negligence by contractor can be your responsibility)

2 types of risks for an employee falling for a fraudulent email

IT - systems are at risk operational (human element of op risk) - people must click the link

Primary Insurer 2.20

In reinsurance, the insurer (also referred to as the ceding company )that transfers or cedes all or part of the insurance risk it has assumed to another insurer in a contractual arrangement.

Underlying 2.14

Is widely used to describe any policy or layer below a referenced excess policy or Layer

Statutes and Regulations

Laws passed by federal, state, or local legislature. Often assign power to create regulations and delegate this responsibility to a regulatory agency. Regulations: clarify and explain statutes, must be consistent with enacted statute, have the same power or authority as the statue.

Loss limit 3.14

Limit of how much loss can be considered for a retrospective plan (doesn't penalize for large events) As long as the insured has a significantly large premium, the retrospective rating plan can be designed to cap losses, and therefore minimize the insurance retention by using a loss limit.

Driver Supervision5.10

Logs, software, check-ins, ride-alongs

Indirect losses

Losses resulting from a peril, but not directly caused by it. Consequence of the direct liability losses that occur when a claim is filed against an organization, several other net income losses are possible. Indirect losses may include business disruption, rent insurance, extra expenses, and other consequences that occur over time.

+ to retrospective plan

Lower costs if you don't incur claims/loss

Holistic risk management

Manages risk across all levels and functions within an organization presents a more complete picture of an organization's risk portfolio and profile. Allows for better decisions and improved outcomes for senior management. Also uses available resources as efficiently as possible to maximize outcomes.

Restrictive Covenants 4.10

Many companies attempt to control copyright infringement, lost exposure by drafting and forcing restrictive covenants. In this context, a restrictive covenant is any provision, clauses, or agreement that on termination of employment, our contract restricts post termination activities of the employee or contracting party. Being a legally binding contract, a restrictive covenant provides an additional claim that an organization can assert when it's copy rights are infringed upon. It enforced restrictive covenants, help reduce the likelihood of copyright infringement. Council should be used to draft a restrictive covenants to insure compliance with the loss of a particular jurisdiction.

Master policy in a controlled master program

Master policy covers all international operations on a blanked basis to prevent a coverage gap

Scorecard

Measurements against a specific set of objectives.

Separation

Mitigating and retention that physically divides so the asset or activity isn't all impacted at once

Applicable, coverages and loss characteristics

Organizations commonly use retrospective riding plans for their workers, compensation, auto liability, and general liability insurance policies. Retrospective rating can also be applied to other coverages, such as auto physical damage and crime. High single retrospective rating plan can be used for more than one type of policy. For example, Worker's Compensation, auto liability, and general liability are commonly combined under a single retrospective rating plan. In general, organizations use, retrospective rating plans to finance their low to medium severity losses. These losses usually have a high frequency, and are therefore somewhat predictable overall. An organization must have a suitable insurance premium usually amounted to several hundred thousand dollars per year to benefit from a retrospective rating plan

Modifying the Consequences of Statutory Liability

Organizations often plead that the statute was unconstitutional or was too vague or ambiguous to be enforceable. If the statute has already been tested on this defense and upheld by a higher court, it will likely not be effective.

4 classifications of operational risk

People this typically includes an organizations employees as well as vendors, customers, contractors, and other groups it relies on to reach its organizational goals Process process risk includes a procedures and practices organizations used to conduct their business System these risk concerns of function of technology, both software and hardware as well as its security External events risks, and this classification includes natural disasters, such as wind storms

External influences on risk appetite

Political, legal, and regulatory environment—regulatory conditions such as capital requirements for financial organizations, political risks such as an unstable national government, and antitrust or other legal concerns Expectations of external stakeholders—targets for return on their investments Economic and market forces—the state of the economy and competitive environment

Examples of questions that may be used in a PESTLE analysis:

Political—Are trade policies or practices likely to change after an upcoming election? Economic—Will increases in unemployment affect the market for products or services? Sociological—Do the organization's products and services still align with consumer attitudes and expectations? Technological—Will the organization be ready to adapt to and benefit from the use of new technology? Legal—Will the organization need to devote resources to comply with new laws? Environmental—Can the organization continue operations in the case of a severe weather event?

Driver Selection 5.9

Process: -analyzing tasks to determine the specific job functions and requirements -recruiting applicants: screening/reviewing applications, interviewing, road tests, background checks, physical exams -hiring/onboarding -maintaining files for credentials/licensing

Per risk excess of loss reinsurance covers:

Property insurance and applies separately to each loss occurring to each risk

Basic functions of umbrella liability policy

Provide access limits above the each occurrence limit of the insureds underlying policies Take the place of the underlined insurance when underlying aggregate limits are reduced or exhausted Cover some claims that are not covered by the insurance in July and policies in excess of the South insured retention specified in the policy The ladder to functions are often referred to as drop down coverage

Large deductible similar to SIR (self-insurance retention) in that both:

Require the insured organization to retain a relatively large amount of loss (they're paying more in deductible)

Sarbanes-Oxley Act of 2002

Requires an officer of a reporting organization to certify that controls are in place to ensure the accuracy of the financial information being reported (such as quarterly earnings for public companies) --- strengthens control environment --- can lead to criminal penalties if laws are violated

Reinsurers may transfer liability to:

Retrocessionaires

Retrospective, reading, and experience rating 3.14

Retrospective rating is often confused with experience rating because both consider the insurance loss experience. Experience rating adjust the premium for the current policy. To recognize the loss experience of the insured organization during pass policy. In contrast the retrospective rating, adjust the premium for the current policy. To recognize the insured's loss experience during the current policy.

Leasing 3.4

Risk control that allows the property owner to retain risk

Public International Law 6.8

Rules and norms governing relationships among states and international organizations. Interrelation of nation states and is governed by treaties and other international agreements

Basel II

Second of the Basel Accords which are recommendations for banking laws and recommendations. Tells banks how much capital to put aside for cloudy days. By Basel Committee on Banking Supervision (BCBS).

Difference between following-form and self-contained policy

Self-contained is subject only to its own provisions

Operation of Self Insurance Plans 3.9

South insurance plan is usually coupled with excess insurance to cover, severe or accumulated losses and limit the organizations retention to an acceptable level. South insurance plans and excess liability insurance may address in organizations lost exposures relative to the frequency and severity of potential losses . Self insurance is particularly well-suited to losses that can be budgeted and paid out overtime because the organization save some money it would otherwise pay towards insurance premiums. For this reason, organizations often self-insure, Worker's Compensation, general liability, and automobile liability loss exposures. Other loss exposures that may be suitable for self insurance include auto physical damage and professional liability, as well as flood and earthquake for which there are limited insurance market. Organizations can also use self insurance to administer healthcare benefits. Many organizations begin to consider South insurance when their annual minimum insurance premium exceeds 500,000 for anyone type of insurance coverage

Retention

Space between lowest and highest permiums that can be charged

Specific and aggregate excess liability insurance 2.15

Specific excess liability, insurance and aggregate excess liability insurance are commonly used in connection with self insured workers compensation plans. Some policies combined a specific and aggregate access approaches

Internal influences on risk appetite

Strategic goals—targets for return on capital and growth Risk attitude—whether it's risk averse, conservative, or aggressive Perception of risk—whether risk is perceived as an opportunity or a threat Strength—available capital and other assets, including human resources

Layering 2.13

Successive levels (or layers) of coverage, using an access of loss strategy in which each layer is in excess of the lower limits, provided by another insurer resulting in a structured program of high limits of coverage

Collateralize 8.7

The act of pledging, an asset like real property to secure a loan or investment by providing resources in the event of default pledge an asset to a bank or other lender to secure a loan. In the event of default, the lender can seize and liquidate the asset. Typical assets include real property, equipment and contract revenues.

retention 2.22

The amount retained by the primary ensure in the reinsurance transaction

Control Environment

The degree of importance a board of directors and management place on their organization's internal control system and their related actions.

Attachment Point 2.28

The dollar amount above which the reinsurer responds to losses.

Los adjustment expenses (LAE). 2.26

The expense, that an insurer and cursed to investigate, defined, and settle claims, according to the terms specified in the insurance policy.

Valuation Methodologies 4.6

The fair market value approach is used by most formal intellectual property valuation reports as it is the standard recognized by most courts and tax authorities. The value it is signs to intellectual property is based on the value it would have on the open market if it was a change hands between a William buyer and they willing seller, this is also referred to as market value. The income approach is the most prevailant intellectual property valuation method. It assigns a current value to a piece of intellectual property based on the discounted cash flow, the property would generate over its useful life. The income approach is the most effective approach for risk management purposes, because its formula can incorporate a number of risk factors. the income approach, examines various scenarios under which threats to the value of intellectual property, could lower its income potential leading to the prioritization of resources to protect it The cost approach assigns a value to a piece of intellectual property, based on the amount, the organization invested in its creation and development. This method assumes that no other entity would pay more for the intellectual property than the cost to create it. It is essential to accurately value intellectual property when an organization is faced with its unauthorized use. In order to recover, the organization was quantify the resulting damage using the fair market, value approach, the income approach, or the cost approach. The properties monetary value is a necessary part of such qualification at any related litigation.

Legal and regulatory risk consequences 6.9

The financial, another consequences of legal and regulatory risk can be catastrophic for an organization. Search risk can lead to. Monetary damages Defense cost Indirect losses Specific performance or injection

Trade dress 4.12

The image and overall appearance ("look and feel") of a product that is protected by trademark law. Trade dress looks to the design and overall visual appearance of a product or product package. Tray dress protects, of course benefits the organization selling such products, but it also protects consumers who might be deceived by product packaging on copycat goods designed to imitate the original product. Trademarks, service marks and trade dress can be described in terms of their categories, creation, and duration.

Waiver 3.5

The intentional relinquishment of a known right

Minimum Premium 3.15

The least an insured organization is required to pay under a retrospective rating plan, regardless of the amount of incurred losses.

service mark 4.12

The legal right granted by the US government to an organization to exclusively own and control, a distinctive word, phrase, symbol, and or design that identifies and distinguishes the source of the services of one party from those of others

Trademark 4.12

The legal right granted by the government entity to an organization to exclusively own and control, a distinctive design, or set of words that legally identifies a product or service as belonging to the organization

Maxximum premium 3.14

The most and insured organization is required to pay under a retrospective reading plan, regardless of the amount of incurred losses Adjusted premium under a retrospective rating plan is subject to a maximum amount and a minimum amount agreed to in the policy. Buy agreeing to limit the amount by which the premium can be adjusted upward based on cover losses, the insurance excepts the rest that total losses during the policy. Could exceed a maximum amount.

Advantages of admitted coverage locally 2.17

The policy will be service locally, increasing the likelihood that service will be a line with local parties. Premiums and claims will be paid in the local currency, eliminating foreign exchange rate wrists for all but imported equipment or materials. Local agents and brokers may be able to understand local coverage nuances says, and advice coverage better. Complying with local laws, and doing business locally helps integrate the company into the local economy and community.

Subrogation 6.13

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.

intellectual property 4.3

The product of human intelligence that has economic value

Disadvantages of purchasing admitted coverage locally 2.17

The risk manager, for a multinational company may have difficulty interpreting a policy written in a foreign language. This could lead to multiple problems, such as nonuniform conditions, coverage, gaps, and under insurance. If competition among insurance locally is not robust, the local policy may be more expensive. And assessing the financial strength of the local ensure can be more difficult. Effective solvency regulation, financial statements, and rating agencies of insures may be lacking locally. Purchasing locally also lessons, a company's purchasing power and decentralize risk management strategy, which Ken weekend, the implementation of in enterprise risk management program.

Asset Risk

The risk that an asset's value will be lower than expected Amount of RBC needed to support an insurer's asset risk = multiplying the asset's NAIC Annual Statement value by a factor provided by the NAIC

Risk Treatment

The selection and implementation of actions to help manage or mitigate a risk.

Reinsurance 3.17

The transfer of insurance risk from one insurer to another through a contractual agreement under which one insurer (the reinsurer) agrees, in return for a reinsurance premium, to indemnify another insurer (the primary insurer) for some or all of the financial consequences of certain loss exposures covered by the primary's insurance policies.

infringement 4.4

The unauthorized use of an individual's intellectual property.

Telematics 5.12

The use of technological devices in vehicles with wireless communication and GPS tracking that transmit data to businesses or government agencies; some return information for the driver.

Purposes and operations of large deductible plans 2.8

They allow an organization to pay a reduced insurance premium for attaining losses below the deductible level. The organization transfers the financial consequences of losses that exceed the deductible to the insurer. As long as occurred insure settles each claim and then periodically bills insured organization for the amount of the loss and possibly also the claims handling expenses up to the deductible. Organization benefits from deferring cash outflows for its retained losses compared with paying a premium upfront. Organizations that choose large deductible plans usually make a commitment to controlling losses they would otherwise retain Insure organization usually must provide the insurer with a form of financial security or collateral such as a letter of credit, to guarantee payment of covered losses up to the deductible amount

Risk threshold

Total level of uncertainty the org is able to accept

True or false : A following form excess liability policy can't always be counted on to provide the same scope of coverage as the corresponding primary liability policy 2.13

True, although this type of policy may state that it follows, all of the terms and conditions contained in the designated primary liability policy for access policy, could be modified by endorsement to exclude certain hazards that the primary policy covers.

Comparing guaranteed-cost and retrospective rating premiums 3.14

Under a guaranteed cost insurance plan, the premium is not affected by the insurance losses that occur during the policy period. Therefore, guaranteed cost insurance is a risk transfer technique. In contrast under a retrospective reading plan, but insured pays a deposit premium at the beginning of the policy period And the insurer (using a rating formula, agreed on before the policy period) adjusts the premium after the end of the policy. To include a portion of the insured organizations covered losses that occur during that period. Because the premium is adjusted upward or downward base directly on a portion of covered losses the insured organization is in affect retaining a portion of its own losses.

Cut Through Clause

Usually requested when the insurer does not satisfy the financial standards established by the insured organization's lender. The clause provides that in the event of the primary insurer's insolvency, the reinsurer will pay any reinsurance proceeds directly to the designated payee, which could be the insured organization, the lender, or both.

Duration of patent (less than copyright) 4.29

Utility - 20 years from application date (17 actual) a utility patent practical life is approximately 17 years because it takes about three years from the time it is first filed for a utility patent to be issued. Design - 14 years (11 actual) Plant - 17 years (14 actual) A pattern may expire if a band in which can occur if the owner of a pattern fails to make a timely response to any request of the US PTO, such as pain, the required maintenance fee, when due

Components of a fleet system

Vehicles, cargoes, operators, vehicle maintenance, routes, vehicle schedules (monitoring devices - IOT devices, roads)

Benefit of surplus

Viewed as critical for insurance agencies (ratio of surplus to premiums written)

Difference between operational and strategic risk

With operational risks, the focus is often on making sure that things (whether they are products or processes) are done right; with strategic risks, the focus is on doing the right things and making the right decisions to ensure the organization achieves its strategic goals

Use of a large deductible plan 2.9

Workers compensation deductibles can apply on a per person and/or per accident basis well auto liability deductibles usually apply on a per accident basis and general liability deductibles on a per occurrence basis These plans can include an aggregate deductible, which cabs total deductible payments over a period of time usually one year. Under a large adoptable plan the amount that ensures incurred adjust losses including legal defense costs can be either inside or outside the deductible. If inside or included then sure add it to the amount of the loss to determine the total amount subject to the deductible. If outside it is not added to the amount of the loss but usually prorated between the insured and insured based on the size of the loss

Torts 6.4

Wrongful act or omission that invades a legally protected right (not a crime or contract)

broad form hold harmless agreement

a hold harmless clause under which the indemnitor assumes any and all liability of the indemnitee under specified circumstances, including liability arising out of the indemnitee's sole fault. Particularly with respect to construction contracts, statutes in a number of states restrict the enforceability of broad form hold harmless agreements.

Risk Retention

accepting that some risks simply arise in the course of one's life and consciously retaining that risk - assumption of risk in which gains and losses are retained within the organization

Special purpose vehicle (related to mortgage)

activity of buying a bundle of mortgage loans and then selling to investors an interest in those income-producing assets is performed by an intermediary - uses collateral (collateralize) for securities to be sold to investors - reduces risk of investing in an organization

retrospective rating plans (true)

adjusted premium subject to max and min agreed in the policy

Decision tree diagram

analyzes the consequences of different decisions

common types of operational controls

approvals and authorizations (preventive) Reconciliations (detective) segregation of duties (preventive) safeguarding assets (both preventive and detective)

Fleets are used for:

assemble people, raw materials, supplies, and other inputs to produce, distribute, and transport goods and services

Basel III capital buffer

build up capital surplus in a buffer account when they are not financially stressed, which can be used to bolster losses the bank incurs when it is financially stressed. Basel III incorporates incentives to encourage financial institutions to develop adequate buffers

Risk Transfer

buying insurance to shift the risk of financial loss to an insurance company - transferring the risk to another party (budgeting for the cost)

Business errors

can be mitigated by errors and omissions (E&O) insurance (and liability insurance) - but rarely provide coverage that don't affect a 3rd party

Layers of legal protection 6.3

civil law, criminal law, and regulation

Feedback loop

constantly and consistently monitor risk management process

implied contracts 6.6

contract by actions (taking care to repair and you're going to pay for the repair)

National Association of Insurance Commissioners (NAIC) developed its RBC (risk-based capital) system

determine the minimum amount of capital an insurer needs to support its operations, given the insurer's risk characteristics consider asset risk, underwriting risk, and other risks applicable to the type of insurance RBC formula adjusts the sum of the values assigned to each risk using a statistical covariance technique. The covariance formula accounts for dependencies among the applicable risk factors and avoids unrealistically high capital requirements.

RBC for Insurers Model Act

enables insurance regulators to act before an insurer becomes too financially weak to be rehabilitated. The RBC formula provides an objective test of an insurer's solvency, and related regulatory action is designed to match it. The nondiscretionary operation of the RBC system allows insurers to self-regulate by performing the RBC calculations themselves and then reducing risk or increasing capital before regulatory action is required. It also forces state regulators to take immediate action under a clear mandate to determine whether an insurer can resolve its own financial problems. If it can, the insurer's financial concerns are addressed by the company or its regulators.

3 modes of persuasion

ethos, logos, pathos

derivatives market

financial contract that derives its value from the performance of another asset (commodity maybe) tor that can derive its value from the yields of another asset or level of an index (stock market)

Drivers 5.9

fleet safety management also includes human resource functions such as appropriately selecting, training, supervising, and dismissing drivers, as well as monitoring their licensing. Using technology to track their driving behavior and provide feedback allows them to improve and can aid risk managers in decisions regarding driver training, supervision, and possible dismissal.

COBIT as both governance and management approaches

governance: ensure that IT doesn't create more risk than the org can tolerate management: balancing the costs of IT-related risks w/ benefits (needs for new systems vs costs)

When to use retrospective rating plan

high frequency and low-to-medium severity losses (workers comp, auto liability, general liability)

vehicle safety equipment

high maneuverability, solid body construction, and highly visible exterior paint (sirens, backup cameras, tie downs) IMPORTANT: lane departure warning system helps prevent rollovers

Other Costs in Retrospective Plan 3.15

insurer overhead and profits, loss adjustment expenses, residual market loadings, and premium taxes The premium under a retrospective rating plan includes costs other than retained losses, such as insurer overhead and profit, loss, adjustment, expenses, residual market, loadings, and premium taxes. The retrospective rating premium also includes a risk transfer premium which compensates the insurer for accepting the risk of either or both of these results An individual loss will far between the lost lemon and the policy limit. The premium component that covers less risk is called an excess lost premium. The total amount of loss is subject to the loss limit during the policy. Will exceed the aggregate amount that causes the retrospective reading plan premium to reach the maximum premium. The premium component that covers this risk is called an insurance charge. The purpose of the wrist, transfer portion of retrospective rating premium is to compensate the insurer for limiting the amount of an insurance covered losses included in the retrospective rating insurance premium adjustments.

Using patents internationally

inventor needs permission from the United States Patent and Trademark Office (USPTO) to file for a patent in another country. Inventors who violate this rule may forfeit their U.S. patent protection.

What to know when creating an effective rm dashboard

know what their audience's objectives are, what types of decisions they make, and what information is needed to inform those decisions

Parametric Financing Applied to Operational Risk

large financial organizations can manage the operational risks from rogue traders and data breaches by issuing bonds to protect themselves against such self-inflicted wounds. Triggered by events that reach certain thresholds, such as a dollar amount of losses caused by a rogue trader or data breach, the bonds could provide funds needed to indemnify the organization and its customers and pass the risk of such events on to willing investors.

Private international law

laws governing transactions of individuals and companies that cross international borders. Impacted by comity (whether one country will recognize the law from another country) and jurisdiction (whether a court has a right to hear the legal dispute). in personam jurisdiction (over people/entity) and in res jurisdiction (whether they have the jurisdiction to render the judgement or not)

Balancing Risk

less risk than expected in one area may be transferred to another area to keep the overall org's risk appetite in check

Purpose and operation of self-insurance

losses that are somewhat predictable in total over defined time period

Self-insurance is most appropriate for orgs that have the follow BUT NOT

low predictability of total losses IS: Ability to tolerate risk retention Willingness to devote capital and resources to financing and administration Commitment to risk control

Types of crimes

major (such as murder) or minor (such as a traffic violation). A felony is a major crime involving long-term punishment. A minor crime, or misdemeanor, is punishable by a monetary fine or short-term imprisonment. Summary offenses are crimes that are not felonies or misdemeanors under state law and that usually result in monetary fines rather than imprisonment.

pool helps w/ law of large numbers

manages uncertainty (doesn't minimize the cost of risk)

Basel III countercyclical buffer

option for banks in countries that experience excess aggregate credit growth. It enables such banks to preserve a maximum amount of capital as a buffer during these expansionary phases of the financial cycle that can later be used during a downturn, when credit conditions weaken. The aim is to give banks a capital buffer that can absorb losses, enabling them to remain financially healthy and to meet their obligations, even when capital markets decline.

Securitization Model 8.6

organization sells income-producing assets to an SPV in exchange for cash - The income-producing assets are no longer owned by the organization but by the SPV to sell to investors - investors purchase the securities for cash and receive a return on their investment commensurate with the risk inherent in the income-producing assets that back the securities, free of the organization's credit risk

Catastrophe Equity Put Option

organization's right to sell equity (its own stock) at a predetermined price in the event of a catastrophic loss

Dashboard Reporting

present info as succinctly as possible

Driver Dismissal 5.10

protecting the terminated driver's rights and structuring termination meetings to minimize possible retaliation reduces the risk of injury to workers and property damage, which lowers the organization's liability

General Data Protection Regulation

protects personal information for individuals w/in the EU

option - when to sell? 8.4

put option - when the strike price is higher than the market price - get the difference (hedging) call option - when you think the stock price will increase above the strike price options trading - buying/selling the above options

Risk appetite measurements

quantitatively (finances) and qualitatively (reputation and management/workforce capabilities) ALSO mgmt can say whether the org is risk adverse (low % of loss) or risk aggressive (higher % of loss - sector that needs a lot of innovation to stay ahead, IE technology product developers)

Vehicle replacement

retire vehicles that cannot be operated safely, are obsolete, or require cost-prohibitive repairs. Depending on business conditions, fleet owners may then replace retired vehicles or simply operate with a smaller fleet.

Difference between risk tolerance and risk appetite

risk appetite as the amount of risk the organization wants to accept to achieve a goal—essentially, it's the target amount of risk that the organization wants to take on. Risk tolerance is broader than that; it's the total amount of risk the organization can accept

noninsurance transfer for risk control 3.4

shifts loss exposures to the transferee to reduce the frequency and/or severity of the transferor's losses arising from the loss exposures

Risk appetite over time

should be shifting (not static) as environment/factors change it should be evaluated

How internal controls start/work

starts with policies and procedures that define employees' responsibilities. Larger organizations often appoint a controller who ensures that effective internal controls and accountability practices are in place. Internal auditors provide independent assurances that controls are in place and functioning as intended.

SWOT uses

strengths can be paired with opportunities to identify areas of competitive advantage, and weaknesses can be paired with threats to identify risks that should be avoided

regulatory capital

the amount of capital that a financial institution must hold because of regulatory requirements (ensure they meet operational losses and honor customer's cash demands)

Underwriting Risk

the risk that premiums are insufficient to cover losses and administrative expenses after taking into account investment income RBC formula applies different factors for each type of insurance to reflect its industry experience (auto = 10% and malpractice = 40%)

express contracts

the terms of the agreement are fully and explicitly stated in words, oral or written (construction bid)

hazard (increase of risk) control

to eliminate or reduce hazards (premises, operations, products, completed operations) - parking lots, building entrances/exits, escalators, elevators, stairways, merchandise displays and counters, and walking surfaces - housekeeping and maintenance is important to keep these places safe

Modifying likelihood of statutory liability 6.14

use experts, legal libraries, trade associations, boards/senior management understand business operations and bylaws/corporate charter, and know securities laws and antitrust laws. Corporate code of conduct can also help statutory liability (follows legal and regulatory environments anywhere that the organization does business)

How subprime mortgages crashed the system

variable rate mortgages made it so that people couldn't afford their mortgage payments - value of mortgage-backed securities fell steeply (global financial crisis)

Blockchain

infrastructure upon which smart contracts are built and implemented

strategic management process

***5 interdependent stages*** developing short- and long-term goals: vision statement/mission statement analyzing internal & external environments: SWOT (strengths/weaknesses = internal, opportunities/threats = external) ALSO PESTLE analysis (political, economic, sociological, technological, legal, and environmental - ID opps/threats in external environment - SWOT each of these categories to go deeper) ALSO Porter's Five Forces Analysis: method of evaluating five forces that affect an organization's competitive environment, including the threat of new entrants to the market, the threat of substitute products or services, the bargaining power of customers, the bargaining power of suppliers, and competition among existing firms. five forces within an organization's competitive environment to analyze how successful an organization, product, or service might be. It's often used to identify opportunities or threats within a SWOT. formulating strategies: 5 - -changes needed to implement the strategy -cost (including the cost of delaying or diverting resources from other projects to pursue the strategy) -overall return on investment -risks involved -risk appetite implementing the strategies: execution - who/what/where/when evaluating the strategies: strategic control, involves monitoring progress toward goals

Vehicle fleet safety/RM 5.7

- Using the right vehicle for each task - adhering to safe vehicle-operating practices - performing regular vehicle maintenance - promptly replacing vehicles when necessary IMPORTANT: drivers suitable schedules impact working at a reasonable pace

Modifying consequences of contractual liability 6.16

-Select favorable jurisdiction: specifies which state's law will govern the contract's interpretation -include limits of liability: anticipate legal claims and to limit an organization's legal responsibility -include a liquidated damages provision: limits the amount for which one party might otherwise be liable -Include a valuation clause: transportation or bailment of property to specify the valuation of the property in the event that it is lost, stolen, or damaged -Evaluate duty to mitigate: failed to fulfill its duty to mitigate and therefore suffered greater loss than was necessary

advantages of parametric trigger or contracts

-allow coverage for events that may otherwise not be insurable -administrative costs of administering such a policy would either make it too expensive to be worthwhile or simply too cost-prohibitive to even offer -reduced administrative costs could also allow smaller transactions to take place, providing consumers with access to preset policies via apps on their phones or through the internet -provide insurance opportunities to consumers in geographic locations that are too far removed from population centers for traditional insurance methods

How Basel III accomplishes goals

-capital planning -continually monitoring risk exposures and capital needs -establishing procedures to control or mitigate banks' risk exposures and capital positions -reporting requirements It offers recommendations and mandates for banks' boards of directors and senior managers to oversee banking operations (including bank policies, processes, and systems) and day-to-day banking activities as a means to better manage banks' operational risks.

Types of monetary damages 6.9

-compensatory damages: reimburse a victim for actual harm -special damages: a form of compensatory damages that awards a sum of money for specific, identifiable expenses associated with the injured person's loss, such as medical expenses or lost wages. -general damages: a monetary award to compensate a victim for losses, such as pain and suffering, that does not involve specific, measurable expenses. -noncompensatory damages: (punitive damages/exemplary damages) may exceed the amount necessary to indemnify a party for losses - to change wrong-doing party's behavior -out or court settlement is an option as well

Modifying consequences of tort liability6.15

-development of defenses -participation of settlement negotiations Risk management professional should rely on legal counsel's expertise to develop the most effective defense strategies, keeping in mind, advantages and implementations of these five widely used defenses Legal privilege - in certain situations and organizations actions in bade others legally protected interest and cause harm, but those actions are legally excused because the organization has a right to invade another interest to promote or protect other greater interests. To resolve such complex, common law establishes priorities among competitive and rights, particularly regarding actions that would otherwise constitute torts. Immunity- certain entities such as governments and governmental officials charities young children, and the insane have traditionally not been subject to lawsuits, arising out of contract in tort law Comparative negligence- the degree of a defendant and plaintiff negligence me a sec to the court decision, the size of the verdict or the severity of the punishment in most cases, the responsibility maybe proportionally shared between the plaintive and defendant Last clear chance doctrine- in some instances an injured party had the ability to avoid loss or injury, but chose to act in a manner that did not avoid risk. For example, pedestrian crossing the street at a red light, may have the last clear chance to observe traffic, and step out of harms way so the driver of the vehicle that strikes the pedestrian could be relieved of some, if not all of the fault of causing injury.

Advantages of Self insurance plans 3.10

-direct control over settlement -select own defense attorneys -set own guidelines for settlement -can determine if they defend or not (not purely dependent on economics) so they can protect reputation -forces the org to focus on loss control

Risk control measures for trade secret loss

-disclose info only to employees who need to know info to perform jobs -require sign-in or security measures where the secret info is used -control documentation regarding the secret by using a safe, "confidential" stamp, or burn bag (burn documents that should be kept secret) -require employees to sign a restrictive covenant (NDA or confidentiality agreement)

Metrics to quantify strategic risk

-economic capital: capital required to remain solvent and cover the risk -risk-adjusted return on capital (RAROC): return on investment after accounting for risk - profitability - calculated by: total return - taxes / economic capital -shareholder value added: corp worth to shareholders (indicator of mgmt effectiveness)

3 categories of derivatives

-forwards contract: two parties negotiate in agreement to buy or sell an asset at a specified price in the future - oil prices for the winter or forever stamps -futures contract: exchange-traded forwards contract that is standardized, openly available, and transferable -options: sell at a specific price (strike price) - call option (buy) put option (sell) ---- seller agrees to buy something at a specific price and if the stock price increases they can buy at x (lower than current, agreed upon value) and sell immediately to make the profit between agreed upon price paid/agreed upon and current price -swaps: orgs paying each other for the type of interest the other one has - fixed and floating (they want the other type for some reason - maybe willing to take on risk?)

Advantages of Contingent Capital Arrangements

-funds it makes available to an organization cost less than funds made available by insurance -allow an organization to obtain a capital infusion at a predetermined price -credit risk isn't a thing (as it would be with normal catastrophe financing)

How courts determine trade secret status

-how well is the secret known outside the business -how much of the secret is disclosed to employees -what steps taken to guard -what is the secret's commercial value -how difficult would it be for someone else to acquire/duplicate the secret

Fleet safety

policies, procedures, and practices that ensure the safety of people, fleet equipment, and cargo by minimizing risks

5 widely used tort liability defenses

-legal privilege: when one reason/purpose overrides another (peace overrides privacy, persons safety overrides property safety) -Immunity: shields persons/organizations from liability (children, nonprofits, government agents) -comparative negligence: levels of fault, may result in sharing the financial impact -last clear chance doctrine: when someone had an opportunity to avoid harm but didn't -assumption of risk: when someone takes on the risk willingly

Consequences of legal/regulatory risk

-monetary damages -defense costs -indirect losses -specific performance or injunction

Environments that impact fleet safety

-physical (highways, weather, terrain, communities, etc) -legal (laws, regulations, etc) -economic (changes to budgets, labor union strikes) -competitive (prices may be driven lower which may impact safety/risk)

Treating potential negative aspects of legal and regulatory risk:

-risk avoidance (CVS stopping selling cigarettes) - stopping or never starting -modifying the likelihood of an event (loss prevention) -Modifying the consequences of an event [blanket liability often doesn't hold up in court as the buyer of the ticket didn't get to negotiate the terms - "contracts of adhesion" ---- baseball hitting someone and breaking collarbone when ticket said the stadium isn't liable]

Benefits of retrospective rating plans 3.15

-save money if they're safer/less losses -encourage risk control -financial stability An organization can save certain expenses by retaining a portion of losses under a retrospective rating plan, instead of transferring all losses under a guaranteed cost insurance plan. One significant expense saved is insurer risk changes, which are extra charges that an insurer includes as part of its guaranteed cost premium to cover the chance that losses will be higher than expected. Retrospective rating plants encourage risk control through them organizations that can prevent end or reduce losses realize a premium saving us compared with what they would pay under a guaranteed cost insurance plan. The direct link between losses and premium is a major incentive for in insured to control losses. It also provides financial stability. If the laws limit and maximum premium are set to reduce the uncertainty of the insurance premium adjustments to a tolerable level, then Sheard will benefit from the relative stability that the retrospective reading plan provides for the insureds earnings net worth and cash flow. If retrospective reading plan, applies to multiple insurance policies, then shirt, also benefits from the stability provided through diversification by retaining losses from different types of insurance policies under a single plan. A retrospective reading plan can help an organization meet its risk financing goals by providing an appropriate balance between risk retention and risk transfer while retaining some of the benefits of insurance. Before adopting a retrospective reading plan an organization should evaluate the plants ability to meet common risk financial goals

Vehicle monitoring/tracking technologies:

-stability control systems (automatically braking when rounding corners to keep vehicle safe) -rear-mounted video cameras -Anti-lock braking systems (ABS) -direct tire pressure monitoring system (increases and decreases pressure depending on road conditions) -Satellite communication w/ GPS -Onboard scales -Dish-mounted cameras -Lane departure warning system (LDWS) -Forward collision warning systems (FCWS)

3 ways to provide contingent capital

-standby credit facility -catastrophe equity put option -contingent surplus note

Systems to control operational risk

preventive controls detective controls

Disadvantages of self insurance plans 3.10

-uncertainty of losses -heavy admin load -expenses to run program are tax deductible, but they are often delayed due to litigation/etc -business contracts dictate that insurance has to be purchased for another org, self insurance won't work - tenant required to add landlord for liability for the building occupants - self insurance may not be acceptable by the landlord (wants more stability from a larger insurer)

Modifying likelihood of tort liability6.12

-waivers (waives right of subrogation - process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.) -hold-harmless agreements - contractual provisions by which one party (the indemnitor) agrees to assume the liability of a second party (the indemnitee) ---renters can't hold landlord liable for 3rd party injuries in their rental AND construction contracts stating construction companies can't be held liable for injuries on a property they worked on (unless it was direct) -Exculpatory agreements - releasing someone from liability of injuries for specific acts (horseback riding or skydiving even if negligence is included) -unilateral notices - signs posted may prevent liability and warranties (usually won't hold up in court as the one party didn't get to negotiate)

Incorporating risk into strategic planning

1) SWOT and PESTLE together 2) Evaluate plans w/ scenario analysis (worst possible event) and strategy map (visual diagram of plans) 3) determine risk threshold (range or amount of risk that is acceptable), risk appetite (amount of risk they're willing to take on), key risk indicators (KRIs - measure of uncertainty in meeting objectives), and treatment triggers (where they treat and where they don't) --- ALSO KPIs (key performance indicators - measures what has occurred and the progress made toward reaching goal vs KRIs are predictive and measure volatility that can affect whether goals can be achieved) KRIs help keep risk within risk appetite Threholds define boundaries for risk appetite KRIs indicate when the thresholds are, or about to be, breached Treatment trigger levels indicate when an organization must take corrective action to prevent risk-appetite thresholds from being breached

4 types of intellectual property protection 4.4

1) copyright, is the most prevalent type of intellectual property protection however, copyright laws do not protect the ideas and underlying concepts of an expressive work. Such laws only protector literal form that expressive work takes. 2) intent to trademark, is to distinguish the products or services, that an organization provides in the mind of its customers. Trademark owners also have some international rights under the Paris convention. This protection can last indefinitely. Provided the trademark is maintain by its owners 3) patent, applies to inventions how long the inventors retains the exclusive, rights depends on the kind of Patent 4) trade secrets office, intellectual property protection, if confidential information is improperly, disclosed to or acquired by a competitor and if the owner takes responsible precautions to keep it, secret trade secrets, Ken last indefinitely. Trade secrets receive international protection under the general agreement on. Tariffs and trade (GATT)

three steps of evaluating strategies

1. Establish performance standards and measurements 2. Compare actual results w/ established standards 3. ID and implement corrective actions when goals are not being met (Example - balanced scorecard: balances specific goals and actions with both long- and short-term and both financial and nonfinancial goals) [needs to be evaluated when internal/external circumstances change or when corrective actions are needed]

Per risk excess of loss reinsurance 2.29

A type of excess of loss reinsurance that covers property insurance and that applies separately to each loss occurring to each risk

Profit-sharing commission 2.27

A Ceding commission that is contingent on the reinsurers realizing a predetermined percentage of excess profit on ceded loss exposures

Forward Contract 8.4

A contract that obligates one party to buy and another party to sell a specific financial instrument or physical commodity at a specified future date and price

Implied Contract 6.6

A contract, who's terms and intentions are indicated by the actions of the parties to the contract, and the surrounding circumstances

Express Contract 6.6

A contract. His terms and intentions are explicitly stated.

exculpatory clause 3.5

A contractual provision purporting to excuse a party from liability resulting from negligence or an otherwise wrongful act.

Hold Harmless Agreement 3.5

A contractual provision that obligates one of the parties to assume the legal liability of another party.

Organization risk taking (after implementation of strategic goals)

A factor in strategic decision making is whether an org has an advantage in controlling the risk w/ a given activity

Insurance-linked security 7.10

A financial instrument whose value is primarily driven by insurance, and our reassurance lost events

Special Damages 6.10

A form of compensatory damages that awards a sum of money for specific, identifiable expenses associated with the injured person's loss, such as medical expenses or lost wages.

Group self insurance plan

A group of employers in the same industry that jointly (as a whole) and severally (individually) guarantee payment of workers compensation benefits to the employees of the group's members. A not-for-profit association or corporation is typically formed to which they pay premiums for self-insurance purposes.

agency captive 3.20

A type of group captive that is owned by insurance agents or brokers rather than by the organizations insured. Agency captives are often formed in response to Hart Markets to ensure select accounts for which there is a limited or nonexistent market. An agency captive provides a way for agents or brokers to assume a portion of their customers lost exposure and intern generate underwriting and investment income.

call option 8.4

An option to buy a set amount of the underlying security at anytime within a specified Period.

Stabilize, lost experience

Demographic, economic, social, and natural forces can cause an insurers loss experience to fluctuate widely, which creates variability in its financial results. This financial stability encourages capital investment. Reinsurance can be arranged to stabilize the loss experience of a primary insurers entire book of business, a line of insurance, (for example, commercial auto), or a class of business (for example, truckers). In addition, a primary insurer can stabilize its lost experience by obtaining reinsurance to limit its liability for a single lost exposure, for several lost exposure, is affected by the same event, or for lost exposures that aggregate over time.

gross vehicle weight rating

GVWR - max weight a vehicle can safely carry vehicle, passengers, drivers, fuel, and cargo

broad form of hold-harmless agreement

General Contractor agrees to indemnify Building Owner for losses that result from General Contractor's sole fault, both parties' joint fault, or Building Owner's sole fault.

Self-insurance

Having enough money to cover large losses on their own

indemnitor

In a Surety agreement, one who agrees to reimburse the surety for any loss it may suffer from having bonded the principal.

Nonadmitted insurance 2.18

Insurance provided in a jurisdiction by an insured that is not license to do business within the jurisdiction. When an insurer domiciled in the country of a parent company sells insurance to the parent companys subsidiary in a foreign country (where the insurer is not an authorized insurer.) it is selling non-admitted insurance. Advantages: Administrative controls can be centralized, which can be more efficient The financial strength of insure is more easily determined The policies written in the language of the country, where the parent company is domiciled, making it easier for the parent company to understand an administer The premium and claim payments will be made in the domestic countries, currency, thereby eliminating foreign exchange rate risk, if only a single currency is used. Nonadmitted insurance has these disadvantages: Claim suggested, can be substantially more complicated without local coverage and local, ensure representatives, especially for liability claims Local management may not have confidence in the nonadmitted coverage provided by the parent company is ensure and may decided by its own coverage locally. Centralized structure

Excess of loss application

Mostly liability - per risk excess of loss applies to primarily property insurance

Ability of a large deductible plan to meet risk financial goals 2.12

Pay for losses - the plan meets the score because insure pays for losses as I become do including losses less than the deductible for which the insured eventually reimburses the insurer Maintain liquidity - the plan meets the school because liquidity is maintained if the deductible level is carefully selected Manage uncertainty - the plan miss the school because the organization can effectively manage cash flow uncertainty if the deductible amount is chosen carefully Comply with legal and regulatory requirements - the plan meets this goal because it can meet legal requirements for purchasing insurance because it insure issues a policy guaranteeing that all covered claims will be paid Minimize the cost of risk the plan may meet the school because it can avoid a substantial amount of premium taxes residual market loadings and ensure overhead and profit charges.

Excess of loss reinsurance

Primary insurer has a stated amount of loss (not %)

Portfolio reinsurance 2.24

Reinsurance that transfers to the reinsurer liability for an entire type of insurance, territory, or book of business after the primary insurer has issued the policies

Elements of successful holistic risk management

organization-wide involvement, organizational and departmental structure that facilitates managing risks as a group, policies that cross departmental barriers, Measurements that consider the entire organization, visible upper management engagement, and performance metrics

Generic mark

marks that are so common they cannot receive federal trademark protection (NOT implied mark)

4 major classifications of operational risk

people process systems external events

Parametric triggers

measurement that determines the value of an insurance-related capital market product based on a parameter that is not within the control of the organization transferring the risk, such as loss indices or earthquake-severity parameters (so the org transferring the risk doesn't act recklessly since their risk is low)

Reinsurance 2.20

an arrangement by which the primary insurer that initially writes the insurance transfers to another insurer part or all of the potential losses associated with such insurance Example : the primary insurer uses reinsurance to increase its large line capacity. In the section, we consider the function of reinsurance and several others that health primary insurers achieve their business goals. Reinsurance commonly referred to as insurance for insurer's is the transfer from one insure, (the primary insurer) to another (the reinsurer) have some or all of the financial consequences of certain loss exposure is covered by the primary insurer's policy The loss, exposure, transferred, or ceeded by the primary insurer could be associated with a single subject of insurance (such as a building, or a fleet of vehicles), a single policy, or a group of policies.

Pools can help w/ this risk financing goal through economies of scale in administration and purchasing excess insurance or reinsurance

minimizing the costs of risks

credit derivatives

derivatives used to reduce a lender's exposure to credit risk by a 3rd party for a fee

Credit Risk

form of asset risk - eflects the possibility that the insurer will not be able to collect money owed to it receivables, such as federal income tax recoverables; interest, dividends, and real estate income; receivables from affiliates, subsidiaries, and parents; amounts receivable relating to uninsured accident and health plans; and aggregate write-ins for assets other than invested assets For each asset, the value shown in the NAIC Annual Statement is multiplied by the appropriate RBC factor to determine the required RBC component for credit risk

Action Levels

formula to determine when to take action - no action is required if the RBC is 200 percent or more of the computed minimum. At some levels, the insurer must submit a comprehensive financial plan, and the regulator may need to take action. At the lowest RBC-computed minimum level (between 70 and 100 percent), the insurer is placed under regulatory control

Assessing strategic risk

goal isn't to eliminate negative risks and/or their consequences; it's to use information about strategic risks to make holistically informed decisions that optimize the risk-reward ratio. This can be difficult because strategic risk is the most intangible and abstract of the four risk quadrants.

Risk appetite

how much risk the org wants to take on

Deciding which strategies to use to meet strategic goals

how to avoid, exploit, or manage risks - By combining broad goals/strategies and risk-treatment priorities, they can be used to influence each other and enable the organization to determine where capital, employees, and other resources should be allocated to produce the best possible returns

Bow tie diagram

identifies a risk and then lists its possible causes and possible consequences on either side - to see how possible risk leads to outcomes (causes left consequences right)

Prouty Approach

identifies four broad categories of loss frequency and three broad categories of loss severity

How to decide whether to go w/ insurance or contingent capital?

if insurance premium is lower than losses (accurate loss forecasting needed)

Loss Prevention

reduces the frequency of a particular loss

Risk Financing

refers to techniques that provide for payment of losses after they occur

Distinctive trademark attributes (if it is memorable it is distinctive)

- Unique symbol/logo - Fabricated word (Walmart) - Word that is unexpected in context (Payroll Factory) - Fanciful image (Blue Bunny Ice Cream) - Product qualities (SlimFast meal replacement shake) (exception - if the general public knows the company/product for that phrase/word then they can get a trademark - even for something basic like A-1 auto parts, etc)

3 types of patents

- Utility: new machine/chemical/process/method -utility patterns issued for an invention or a process that has some utility or usefulness. The invention does not have to be marketable to qualify for a patent, but it must work. - Design: ornamental features of a product- design pattern is a pattern issued for a design that is new or innovative, or that is ornamental or aesthetic in nature. For example, a bottle shaped would qualify for a design patent, if the shape was new, and did not affect the bottles functionality - Plant: biological a-sexual reproducing plant- a plant pattern is issued for an asexual reproducing plant that is new, such as the Sugraone grapevine used in wine production

5 steps to carry out by mid-level or department managers for strategic plan

1. ID and document processes/tasks/responsibilities 2. Frequently communicate info about the strategic plan 3. Assign specific responsibilities/tasks/authority/accountability 4. Allocate adequate resources (finances/staff/training/time/equipment/space/data/technology) 5. Make necessary adjustments to stay on track for goals

injunction 6.11

A court ordered equitable remedy, requiring a party to act or refrain from acting

Specific Performance 6.12

A court-ordered equitable remedy requiring a party to perform a certain act, often - but not always - as a result of breach of a contract.

Management Controls

A system of specified standards or objectives against which an organization's management measures performance. (coordinate resource allocation, motivate performance, and measure outcomes. Management controls include things like capital budgeting, expense-variance reviews, and balanced scorecards.)

Put option 8.4

An option, giving the holder the right to sell a set amount of the underlying security at any time within a specified. Period

Strategic Management

identifying, describing, and continually reviewing business decisions in a way that will propel an organization to perform better - establishes and creates a means to evaluate the decisions and actions that ultimately determine how the organization performs.

Application for patent 4.18

The inventor or inventors employer must file an application with the USPTO. In the patent application, the inventor explains how to make, and use the invention and explains how or why the invention is different from other similar items Well, individuals organizations can file patent applications many are filed by attorneys, and before, filing a patent application, the inventor should perform a pattern search to determine whether similar inventions already exist, examiners typically reject applications, whether in hole or in part, because the claims in the application, do not distinguish the invention from prior art the claims are anticipated (meaning that they are not novel, or are obvious in view of the known prior art.) or the claims are indefinite (meaning they do not really explained invention.) If the patent application is allowed (excepted), then venture receives what is called a ribbon copy of the document, bestow in the patent. To maintain the patent enforce the inventor or Patton. Owner must pay regular maintenance fees until the patent expires. If the patent application is rejected in whole or in part the USPTO issues an office action letter that explains the reasons for the rejection. The inventor can reply to the office, action letter by amending the rejected claims, or explaining why the rejection is improper. Examiner, then reviews amended claim and explanation if persuaded, the examiner allows the claims and issues a pardon, if the claims are rejected again the inventor can apply to the board of patent appeals and interferences. If the board for Jax application for inventors only recourse is to file a lawsuit against the USPTO in federal court. If the patent application is rejected or the patent has expired either because of the statutory time limit or for failure to maintain it invention enters the public domain. This means that the inventor cannot prohibit anyone from using it. Patent applications must be filed, and then ventures name the patent inventor owns the patent rights, but me a sign them to another party at any time inventors who signed so-called invent for hire agreements with their employers often do this. Therefore, while the patent application my list inventor, it may also show the employer as assignee of the rights.

Eligibility for a patent 4.17

To be eligible for a US patent an invention must be New useful, and nonobvious [the invention displays a level of innovation or produces results that are unexpected when compared with previous developments in that area (prior art)] Each country has its own standards regarding what is patentable, and how long a patent will last inventors can apply to each individual country in which they want a patent or file an international application that covers many countries. For an invention patented in the United States, them venture, needs permission from the United States patent and trademark office USPTO to file for a patent in another country. Inventors, who, violate this rule may forfeit their US patent protection. In the US and many other jurisdictions, an invention must be new useful and non-obvious to be considered for patent non-obvious means that the invention displays a level of innovation or produces results that are unexpected, when compared with previous developments in that area (prior art) Also, that invention must be non-obvious to someone with ordinary skills in the applicable field not just to the lead person. For example, a new dental tool would have to be non-obvious to other members of the dental profession, in order to receive a patent.

How intellectual property protection methods, overlap 4.5

Trade secret and copyright An original work of expression can be protected as a trade secret and also a copy right up until the time it is publish. Obviously wants a work of expression is published. It is no longer secret and therefore loses protection as a trade secret. However, copyright protection continues. Trade secret and Patent An owner can pursue a patent application, and at the same time assert, that invention is a trade secret, however, the moment a patent for the patent's protection to be viable. Because of this full disclosure, some organizations elect, not apply for a patent, and rather to maintain the invention as a trade secret. Another consideration is that a trade secret can be maintained indefinitely, while they patent has a limited lifespan. Copyright and patent Copyright laws protects the expression of an idea, but not the Idea itself. A patent is intended to protect ID itself, but not how the idea is expressed. A common example of of of the overlap in. Is computer software, which can simultaneously have both copyright and patent protection. A copyright protects the literal expression, which includes the program, structure, sequence, and organization. A patent protects the programs, innovative approach to solving a problem. Because patent protection is not restricted to how the program is expressed. It provides broader protection than a copyright, but it is also harder to obtain and has a shorter lifespan.

single-parent captive, or pure captive 3.19

an insurer owned by only one parent, such as a corporation Is a captive insurer owned by one company that insurers all or part of the loss exposures of that company. Because a captive is an insurer, it requires an investment is capital by its parent as well as expenditures, to manage the company, and to pay accounting, auditing, legal, and underwriting expenses

Defense costs 6.10

investigation, expert witnesses, producing documents, obtaining witnesses, (defendant can be liable for: jury fees, filing fees, premiums on court bonds)

Gramm-Leach-Bliley Act

regulates how financial institutions handle individuals private information

Covariance

relative association between variables to move in tandem or independently of each other

Risk Control Strategies

promotes consistency in risk-taking and risk-avoidance activities at all levels designed around a framework structured to facilitate understanding, communication, and appropriate action Control measures should be implemented at all levels of the organization and include reporting systems structured to allow senior management to determine whether goals are being met.

Trademark categories 4.13

- Fanciful mark: invented word/phrase (pepsi) it cannot be found in a dictionary, and had no meaning before adopted for the product. Because it is surprising and original a fanciful Mark stands out. These qualities provide the highest degree of trademark protection possible, which means an organization that is seeking help from a cord to prevent another from using. It's Mark has the lowest burden of proof to be successful. - Arbitrary mark: common word/phrase that has developed a link to the brand/item (apple) And arbitrary mark is a common word that could be found in a dictionary, but had no meaning in relation to the product before it was adopted. - Suggestive mark: implies certain qualities (bite-no-more bug spray) It's suggestive Mark is one that imply certain product qualities. - Descriptive mark: describes the product (luxury limo service) --- receives the least amount of protection by competitors The name emphasizes a product feature rather than distinguishing the product from its competitors Not every trademark receives the protection of trademark law. If a mark is generic in that, it describes the type of product rather than the brand it is not covered by federal statute for example, sports utility vehicle is not protected because it describes a product itself. Peoples names are also not entitled to protection under trademark law, unless the name becomes well-known through use or advertising, such as McDonald's and Campbells. Likewise, a trade, name or name of business is not considered a trademark, unless it is used in the marketplace to identify a product produced by the business. An example of this is the Dixie cup company .

Basel III

A comprehensive set of reform measures by BCBS improving the quality, consistency, and transparency of banks' capital base to help the commercial banking sector better absorb shocks from financial and economic stressors. Including improved risk management and governance, along with proposed measures to increase banks' transparency and disclosures. capital requirement (a surcharge) for large, global, systemically important banks (G-SIBs). If these banks, which are considered too big to fail, are distressed or experience a disorderly failure like that of the 2008 crisis focuses on capital planning, continually monitoring risk exposures and capital needs, establishing procedures to control or mitigate banks' risk exposures and capital positions, and reporting requirements recommendations and mandates for banks' boards of directors and senior managers to oversee banking operations (including bank policies, processes, and systems) and day-to-day banking activities as a means to better manage banks' operational risks require capital distribution and to strengthen capital requirements for credit risk by type of asset. The revised tiers ensure that banks are adequately capitalized through credit risk-adjusted assets both on and off their balance sheets defines categories of capitalization—well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized—and prescribes prompt corrective actions to be taken by the bank and discretionary or mandatory actions to be taken by regulators for institutions that fall under any category other than well capitalized further measures of capital stability in addition to the minimum RBC requirements in the form of two capital surplus buffers: a capital conservation buffer and a countercyclical capital buffer

Trade Secret 4.22

A formula, device, idea, process, or other information used in a business that gives the owner a competitive advantage in the marketplace. (coke - private and never registered but protected) --- kept confidential by limiting the amount of people that monitor/know the manufacturing process A trade secret is created automatically that is without a formal application process. In fact, no mechanism exist to officially designate an invention, an idea, common, or a process as a trade secret. A trade secret is defined under international law based on three factors recognized by the world trade organization. It is secret from the public, it has economic value to the holder, because of its secrecy, and the holder is deliberate, in its attempt to maintain the secret. In the United States, the Economic Espionage Act of 1996, defines a trade secret in a similar fashion In many cases, courts, determine whether an invention, an idea, or a process should receive trade secret status. To do this, they first consider whether the related information has value and has really been treated as a secret courts answer these questions as part of the process. How well is a secret known outside the business that owns it? How much of the secret is disclosed to employees of the business that owns it? What steps are taken to guard the secret? What is a secrets commercial value? How difficult would it be for someone else to acquire or duplicate the secret? A trade secret remains in force for as long as a secret can be maintained. Once a trade secret is no longer commercially valuable. Its owners may not want to continue efforts to maintain the secrecy.

risk retention group 3.20

A group captive formed under the requirements of the Liability Risk Retention Act of 1986 to insure the parent organizations. Can be centered in one place and cover anyone in any state. A risk retention group as a group captive formed under the requirements of the US liability, risk retention act of 1986 to provide liability coverage. (accept personal liability, insurance, employers, liability, insurance, and Worker's Compensation insurance) To form a risk retention group, all of its owners must be from the same industry, and must be insured by the group. Conversely, all insurers must be owners. A major benefit of a risk retention group is that it needs to be licensed in only one state to provide liability coverage to group members anywhere in the United States.

Captive insurer, or captive 3.17

A subsidiary formed to insure the loss exposures of its parent company and the parent's affiliates. An organization that's willing to retain a significant share of its own losses in exchange for greater flexibility conform it's owned subsidiary, insurer to dress it's risk financial needs. This approach to handling hazard risk called a captive insurance plan is a relatively common way for organizations to reduce their overall cost of risk through retention. A captive insurers, premium purpose is usually to reduce the parent organizations cost of risk. The captive insurers relationship with its parent is just like any other insurers. A captive insurer, collect premiums, issued policies, and pays covered losses. Most captive insurers, purchase reinsurance, usually on an excess of loss basis to transfer some of their loss exposures to another insurer.

Internal Controls 7.4

A system or process that an organization uses to achieve its operational goals, internal and external financial reporting goals, or legal and regulatory compliance goals. (ensure that an organization's methods, processes, and systems support its objectives)

Trademark Duration 4.14

A trademark that has been entered on the US PTO, principal register is protected for 10 years. The registration can last indefinitely provided it is renewed every 10 years.

Aggregate excess of loss reinsurance 2.29

A type of excess of loss reinsurance that covers aggregated losses that exceed the attachment point, stated as a dollar amount of loss or as a loss ratio, and that occur over a specified period, usually one year.

Individual versus group self insurance plans 3.8

An individual self insurance plan involves only one organization, any organization can self insurance laws exposure provided that the state or states it operates in permits, self insurance plans, and that it satisfies any applicable regulatory requirements. Generally only Worker's Compensation auto liability and general liability. Self insurance plans are subject to state regulatory controls. Under a group, self insurance plan, several similar employers form a non-for profit, association, or corporation to which they pay premiums to manage their self insurance. Unlike individuals, South insurance plans which can be used for several types of loss exposures group self insurance plans can be used only for Worker's Compensation laws exposures and healthcare benefits. A group self insurance plan operates like an insurer in that it pools the loss exposures of its members . The plans, administrator, issues, member agreements, collects premiums, and manages claims. Administrator also purchases access, liability, insurance (or excess of loss reinsurance), and makes required state regulatory filings A group Self insurance plan can benefit an organization that is too small to self-insure is los exposures on its own. These plans offer savings through economies of scale in administration, claims handling, and the purchase of excess liability, insurance or reinsurance.

Reinsurance intermediary 2.21

An intermediary that works with primary insurers to develop reinsurance programs and that negotiates contracts of reinsurance between the primary insurer and reinsurer, receiving commission for placement and other services rendered.

Injunction

An order which legally requires an entity/individual from engaging in a particular activity/action

Characteristics of captive insurance plans 3.18

Captive insurance plans generally are used for paying the first layer of losses where there is a relatively high, lost frequency and low to medium, lost severity with excess insurance to cover the higher severity losses. For example, in organization, establishes a captive insurer to cover. It's general liability loss exposures with these elements: The captive insurer issues, a general liability insurance policy with a limit of 1 million per currents to its parent organization . The captive insurer limits its retention to 250,000 per occurrence by purchasing excess of loss reinsurance of 750,000 excess of 250,000 per occurrence . The parent purchases excess liability insurance from a commercial insurer on a guaranteed cost basis with a limit of 25 million per occurrence to cover general liability losses that exceed the 1 million layer of loss covered by the captive, ensure the total limit of insurance available to the organization per occurrence is 26 million. Because the captive owner/parent is ultimately responsible for expenses, such as claims administration, lost, control, and underwriting administrative requirements of a captive insurance plan our substantial

Responses to anticipated defenses 4.10

In some situations alleged infringers, do not deny that they copy the works only that copyright owners waited too long to claim infringement. The legal term for waiting too long to assert a legal right is called laches. Counsel can help the risk management professional determine whether copyright protection has actually been lost because of such a delay. If the infringement was hidden or difficult to discover some courts allow additional time to bring an infringement claim. Although the copyright owner has no duty to actively search for infringers. The copyright owner must act in a timely manner once and infringement has been discovered. Copyright infringers can claim that their infringement was for the purposes of teaching, research, scholarship, criticism, or journalism. These purposes have been recognized by some courts as legitimate, or fair use, exceptions to copyright protection. Traditionally, these purposes are only defenses not rights. Therefore an infringer who relies on this defense does not know whether a court will agree that the use was fair until the court upholds the defense however, a 2015 US Supreme Court ruling found that fair use is an expressly authorized, right Most infringers do not take this risk, and therefore sees their activity voluntarily when asked. The innocent infringement defense allows parties who adamantly, but unintentionally infringed upon the copyrights of an organization or individual to see you so activity, and pay only the economic value of the material. They used innocent infringement often arises when the copyrighted materials use has been authorized, for example, the owner of a copyrighted material may give an innocent infrindger the right to use its material and the infringers initial publication, but not in subsequent derivative works.

Purposes of Self insurance plans 3.9

The purpose of a sells insurance plan is to enable an organization to lower. It's long-term cost of risk by allowing it to pay for its own losses without incurring the transaction costs associated with insurance. Self insurance is a form of retention under which an organization records its losses and maintains a formal system to pay for them. Self insurance can be contrast with informal retention, when an organization simply pays for its losses as they occur with it's cash flow and or current liquid assets, but does not have formal payment procedures or methods for recording losses. Self insurance is best for losses that are of both high frequency and low severity. Such losses are somewhat predictable in total over a defined time. Such as one year. Losses that are both low frequency and low severity are easily self insured, but many organizations retain such losses informally to eliminate the associated administrative costs. High severity, losses are unsuitable for self insurance, because they are typically low frequency, relatively unpredictable, and too large to retain some organizations also self insured, medium severity losses, although the resulting financial effects can be unpredictable, depending on their frequency.

Noninsurance transfer where transferor transfers loss exposure to transferee, eliminating the possibility that the transferor will suffer a loss is a noninsurance:

risk control transfer (not loss control mechanism)

trademark creation 4.14

Trademarks are created when the mark is first used on a product or in product, marketing the business that first uses the mark is considered to be the marks owner. There are two requirements for trademark creation. The mark must be distinctive and the trademarks owner must be the first to use the trademark. A trademark is distinctive, if it is memorable - and it is considered memorable. If it is either unique or unusual, or has gained a well-known association with a certain brand. Distinctive trademarks can take several forms. -Unique symbols or logo -Fabricated word example Walmart -Word that is unexpected in the context in which it's used for example, the payroll factory -Word that creates a fanciful image for example, blue bunny, ice cream -Word that describes a products quality is for example slim fast meal replacement shake Generally, if a word used to describe, a product is not distinctive, such as A1 auto than a trade mark is not created. An exception is win the organization has use the word to describe the product for so long that a substantial percentage of the general public associates the word with a product for example, McDonald's hamburgers Common words that the general public has come to associate with a product, because of a long-term usage are said to have acquired a secondary meaning. Trademarks, with a secondary meaning qualifies being distinctive. The second requirement of trademark creation is that the owner of the trademark must be the first to introduce the mark into the stream of commerce. This is accomplished by attaching the trademark to a product being sold, or by using it in product marketing generally the first to use a trademark in this way, owns it an exception to the rule occurs when another party files an intent to use trademark application with the United States, patent and trademark office (USPTO) the date that I intend to use application is filed, becomes the date of first use provided the applicant attaches the trademark to the product, or uses it in product marketing within a specific time. And follows up by registering the trademark.

Fleet technological advances 5.12

Vehicle monitoring, and tracking technologies include these Stability control systems - automatically engage the brake system when sensing the vehicle is navigating a curve at an unsafe rate of speed, allowing the driver to maintain vehicle control Rear mounted video cameras - enhance a driver's ability to see areas behind the vehicle Antilock braking system ABS- prevent the vehicle wheels from locking up when the brakes are engaged. An ABS enables the wheels to maintain traction during a skid, allowing the driver to maintain control of the vehicle especially when driving on wet or slippery road surfaces. Direct tire pressure monitoring system- generate real time alert, warning, drivers of improperly inflated tires Onboard tire inflation systems- automatically maintain proper air pressure levels in selected tires to enhance vehicle, maneuverability and traction when driving over difficult types of services Satellite communication with global positioning system GPS- collect real time vehicle location, data, allowing fleet, managers and owners to monitor of vehicles. Current location and movements other data collected by these systems include vehicle, diagnostics idling times, travel, speed, and amount of hours a vehicle is in use. Onboard scales - calculate the combined weight of the vehicle and it's a load to ensure that the vehicles maximum pay load capacity is not exceeded onboard skills, enable proper low distribution for safe and efficient loading and vehicle operation Dash Mounted cameras - create video, surveillance recordings of events, occurring in front of a vehicle also function as collision warning systems Lane departure warning systems (LDWS)- alert drivers of situations that could lead to an accident. Forward collision, warning, systems - alert drivers to maintain safe distance from vehicles in front of them The federal motor carrier, safety administration, FM, CSA recommend such technology, driven safety systems for fleet operators spread accidents and minimize risk the national Highway traffic, safety administration, and HT essay. Also recommend the use of vehicle safety technologies, including automatic emergency, braking systems.

Contingent capital agreements

risk financing alternatives to insurance by a standby credit facility before a loss occurs - cost is a commitment fee (based on likelihood of loss, interest rates of alternative investments, and credit risk of org) - investors in contingent capital agreements become creditors of (equity investors) in the org ---usually an option

basis risk

risk that the amount the organization receives to offset its losses may be greater than or less than its actual losses (disadvantage of parametric trigger or contract) other disadvantages - loss may be greater than predetermined amount or trigger could be just below the threshold so they have loss but not enough to get a payout

Routes 5.11

safe, cost-effective, reliable travel routes are imperative - alternate paths may be needed - not steep grades, not heavy traffic, good cell and radio transmission, good lighting, frequent rest stops

noninsurance transfer for risk financing 3.5

transfers only the financial consequences of the transferor's loss exposures Noninsurance transfers for risk financing or accomplished through hold harmless agreement. Switch are commonly included in various types of contracts agreements, such as construction contracts, maintenance, contract, rental and lease agreements, purchase, orders, and sales agreements. An example of a hold harmless agreement is the provision in a list of premises: "to the fullest extent, permitted by law, the lease, seashell, indemnify, defend, and hold harmless the leaser, agents, and employees of the lesser from an against all claims arising out of order, resulting from the leased premises". The party that uses a hold harmless agreement to transfer. The financial consequences of lost to a second party, is commonly referred to as the indemnitee, the second party, which agrees to indemnify the indemnitee is referred to as the indemnitor. To increase the likelihood that it will have the necessary financial resources, the indemnitor may need to demonstrate proof of financial responsibility, such as through a certificate of insurance, commercial general liability, insurance policies, and commercial auto liability policy is commonly include coverage for liability assumed under uninsured contract. Hold, harmless agreement can be classified according to the extent of responsibility they transfer. For example, assume the contracting parties are building owner and general contractor. They may adopt anyone of these three forms: 1. Limited form- general contractor agrees to indemnify building owner only for claims that result from general contractors own negligence, often referred to as sole fault. 2. Intermediate form- general contractor agrees to indemnify building owner only for claims that result from general contractor, soul fault, or from both parties joint fault. 3. Board form - general contractor agrees to indemnify building owner for losses that result from general contractor, soul fault, both parties joint, fault, or building owner sole fault. Mini jurisdictions, have anti-indemnity statutes that prohibit board form, intermediate, form, or both board and intermediate form hold harmless agreement contained in construction contracts. In some jurisdictions that do not have anti-indemnity statutes judicial rules ( established by courts) limit the use of hold, harmless agreements. The purpose of these statutes and rules is to prevent a party with greater bargaining power from taking advantage of the other party to a contract, who is often less able to assume the others liability. Because the statutory prohibitions and judicial rules vary by state, determining the legality of a proposed hold harmless agreement in the applicable jurisdiction before, including it in a contract is essential. The handling of punitive damages under hold harmless agreements, also varies. In some there indemnitors payment of punitive damages is included automatically within a hold harmless agreement. In others, punitive damages are included only have specified. Install others, contractual transfer of the obligation to pay punitive damages is illegal. In some cases organizations use hold, harmless agreements to finance lost exposures that are not economically feasible to ensure. However, in many cases an organization using a hold harmless agreement to finance a particular lost exposure. Also has insurance that includes coverage for that exposure. For example, a shopper is injured by mobile equipment, operated by an employee of the contractor and Sue's both the contractor and the owner. In, according with the hold, harmless agreement, the contractor indemnifies the owner for its share of the settlement paid to the claimant. The owner did not need to use its own insurance for this claim, ultimately reducing his cost of risk.

Strategic Risk

uncertainty regarding the firm's financial goals and objectives - identify and analyze strategic risks that can affect—positively or negatively—its long-term performance

Insurers will Generally insure... 2.5 -2.6

- it's associated with pure risk (does or doesn't no speculation), - it's accidental from the insureds stand point- accidental events ex: fires from lightening to building, - it's definite and measurable- loses definite in time/cause/location, -It's one of a large number of similar exposure units- large occurrence of insurance need to Pool them together, - It is not catastrophic- not same things in the same place (so it isn't catastrophic for the insurance provider), - is economically feasible to insure not small losses where The expense of providing the insurance probably exceeds the amount of potential losses similarly most insurers are not willing to ensure losses that are almost certain to occur

Ability of guaranteed cost insurance to meet wrist financial goals 2.7

-Pay for losses- Insurance can meet the score provided a loss exposures are covered by the guaranteed cost insurance policies -maintain liquidity Dash insurance can meet this goal because the organization requires less liquidity with guaranteed cost insurance compared with retention or other risk financing measures -manage uncertainty - insurance can meet the school because much of the uncertainty about future losses is transferred to the insurer -comply with legal and regulatory requirements Dash insurance can meet at school especially regarding loss exposures that are required (by law or contractual obligations) to be transferred -Minimize the cost of risk Dash insurance can meet the score but it is not ideal because insurance premiums are designed to cover not only expected losses but also ensure administrative costs, adverse selection and moral hazard cost, premium taxes, and any social loadings

Prouty's 4 categories of loss frequency

1) Almost nil- extremely unlikely to occur 2) Slight- could occur, but hasn't 3) Moderate- occurs occasionally 4) Definite- occurs regularly

3 types of Excess of Loss

1) Per Risk (each loss/risk is separate), 2) per occurrence (catastrophe protection - super high amount of claims), 3) aggregate excess (covers aggregated losses usually a year

Specific Excess Liability Policy 2.15

An excess liability policy that requires the insured to retain a stipulated amount of liability loss from the first dollar for all losses resulting from each single occurrence or accident. Requires the insured to retain an agreed amount of loss from the first dollar for all losses resulting from each single occurrence. Insure than pays losses from the occurrence in excess of the retention up to the policy limit. Example: if the policy required a retention of 100,000, the insurer would pay all loss resulting from a single occurrence in excess of 100,000 up to the policy limit of 1 million

working cover 2.28

An excess of loss reinsurance agreement with a low attachment point (reduce costs) - profitable years will offset the expensive ones

Controlled Master Program 2.19

A customized collection of admitted insurance policies, and a non-admitted master policy. The admitted policies cover the foreign subsidiaries of a multinational business and are purchased in the local insurance markets of the foreign countries. The nonadmitted policy covers all of the insureds international operations on a blanket basis, and is often purchasing the countries where the parent company is domiciled. Non-admitted master policy issued in the country in which the insured is domiciled paired with locally admitted policies issued in the foreign countries in which the insured operates. The non-admitted policy is a master policy that can include difference in conditions (DIC) and difference in limits (DIL) coverage to prevent a coverage gap. Such a gap may occur if they admitted policies purchase locally provided lower limits or less coverage than the parent companies require. The master policies can also provide specialty coverage, such as political risk, contingent business interruption, and foreign volunteer workers compensation. Advantages : Controlled master programs, provided numerous advantages, including a uniformly consistent insurance program that is centralized yet captures the benefits of local policies by combining the policies, Under one program, the companies purchasing power is consolidated, and duplicate coverage is eliminated. Both of these factors reduce premiums and other costs. The global nature of the program allows a company to negotiate worldwide rates, terms, and conditions that reflect its global size and experience. Makes it companies, risk management goals more likely to be realized, and gives a risk manager more opportunities to implement a consistent global risk management strategy. It also reduces the accumulation of risk and diversifies. The risk across a company is subsidiaries the program generates a large volume of useful risk management information from countries around the world. These allow risk managers determine best practices in form and intracompany risk management community. The primary advantage of these programs is prevention of coverage gaps,. What the local policy doesn't cover, the master policy may cover. In addition to DIC/DIL COVERAGE, MASTER POLICIES CAN PROVIDE OTHER COVERAGE, SUCH AS CURRENCY dEVALUATION "coinINSURANCE DEFICIENCY, TAX LIABILITY, AND NEIGHBORS AND TENANTS LIABILITIES. These coverages are usually not available in standard coverage forms, but are frequently requested by multinational companies. Disadvantages: Control master programs generate a large amount of information that must be reviewed and analyze. This consumes considerable resources to stay current. Another disadvantage is that local rest managers may resist, relinquishing their responsibility of purchasing all the coverage for a foreign subsidiary. Also, if the same insurer, and it's foreign local subsidiaries are used to provide the master policy and the local policy a counter party risk may br a concern .

Excess Liability Policy 2.12

A policy that covers liability claims in excess of the limits of an underlying policy or a stated retention amount. Following Form: if the policy covers the excess is covered too Self-contained: unique and may be different from the original policy Umbrella liability Two. Additional types. Specific, excess and aggregate excess are often used in connection with south insured workers compensation obligations

Risk Modification

A process to increase likelihood and/or consequences from positive or negative outcome

Treaty Reinsurance 2.25

A reinsurance agreement that covers an entire class or portfolio of loss exposures and provides that the primary insurer's individual loss exposures that fall within the treaty are automatically reinsured. Primary insurance use treaty reinsurance as a foundation of their reinsurance programs. They provide primary insurers with the certainty. They need to develop underwriting policies and guidelines. Primary insurance work with either reinsurance, intermediaries, or reinsurance directly to develop reinsurance programs that address the primary insurers varied needs. These reinsurance programs often include several reinsurance agreements with several reinsures. Primary insurers, often use treaty reinsurance agreements to cover many loss exposures over a period of time although the reinsurance agreements terms may be for only one year, the relationship between the primary insure and the reinsure often span many years. Management usually finds that a long term relationship with every insurer enables the primary insurer to consistently fulfill its producers request to place insurance with them.

Surplus relief 2.24

A replenishment of policyholders' surplus provided by the ceding commission paid to the primary insurer by the reinsurer. This ceding commission immediately offsets the primary insurance policy acquisition, expenses for the reinsured policy, and often includes an additional commission, if the reinsurance ceded is profitable. As a result, policyholder surplus increases, and the capacity ratio decreases, allowing further premium growth to occur.

Risk exploitation

A risk management strategy for making a positive uncertainty more likely to occur

Catastrophe excess of loss reinsurance 2.29

A type of excess of loss reinsurance that protects the primary insurer from an accumulation of retained losses that arise from a single catastrophic event.

Surplus Share Reinsurance 2.28

A type of pro rata reinsurance in which the policies covered are those whose amount of insurance exceeds a stipulated dollar amount, or line.

Quota Share Reinsurance 2.27

A type of pro rata reinsurance in which the primary insurer and the reinsurer share the amounts of insurance, policy premiums, and losses (including loss adjustment expenses) using a FIXED PERCENTAGE.

Pro rata reinsurance 2.26

A type of reinsurance in which the primary insurer and reinsurer proportionately share the amounts of insurance, policy premiums, and losses (including loss adjustment expenses)

Excess of Loss Reinsurance

A type of reinsurance in which the primary insurer is indemnified for losses that exceed a specified dollar amount

Excess of Loss Reinsurance 2.28

A type of reinsurance in which the primary insurer is indemnified for losses that exceed a specified dollar amount. In excess of loss, reinsurance also known as non-proportional reinsurance, the reinsure response, only to losses that exceed the primary ensures retention, often referred to as the attachment point. The primary insurer fully retains losses below the attachment point, and the reinsure may require the primary insurer to also retain responsibility for a percentage of the losses that exceed the attachment point. Premiums are negotiated based on the likelihood that losses will exceed the attachment point. Premiums for excess of loss reinsurance is usually a predominant percentage of the policy premium charged by the primary insurer (often called the subject, premium or underlying premium). Therefore, unlike prorate reinsurance, the excess of loss reinsure, receives a non-proportional share of the premium. Reinsures do not pay ceding commissions, under excess of loss, reinsurance agreements. However, the reinsurer may reward the primary ensure for favorable, lots experience by pain, a profit commission, or reducing the rate used to calculate thththe reinsurance the reinsurance premium.

Following Forks excess liability 2.14

An excess liability policy that covers a claim in excess of the underlying limits only if the loss is covered by the underlying insurance. A true following form, excess liability policy would state that, except for the policy limits, all of the provisions and conditions of the designated underlying policy are incorporated into and adopted by the excess liability policy, and it would contain no provisions conflicting with the underlying policy. In these situations, the policies are often described as being concurrent Although many excess liability policies are called following form policies, they are often not completely concurrent with the underlying policy. Example the excess liability insure my add one or more exclusions to its following foreign policy that are not contained in the underlying policy. If the underlying policy would cover a loss of the axis, liability policy would not the provisions of the axis liability policy may take presidents, went to claim reaches this layer test covering a narrower scope of events, then the primary policy. Above and beyond coverage, as long as it would qualify for the underlying policy

Self contained excess liability 2.14

An excess liability policy that is subject to its own provisions only, and does not depend on the provisions of the underlying policy for determining the scope of the coverage. Does not depend on the provisions of the underlying policies for determining the scope of the coverage (with one exception) as a result coverage gaps between the access an underlying layers can occur. These apply to a claim that exceeds the limits of the underlying policy, only if the claim is also covered under the provisions of the south contain excess liability policy. An exception occurs when the excess liability policy provides coverage in excess of aggregate limits in the underlying policy that have been reduced or exhausted by prior claims. This approach can benefit insured when the excess liability policy contains exclusions are other restrictions that are not present in the underlined policy May have unique coverage so gaps won't occur

Aggregate excess liability policy (stop loss excess liability policy) 2.15

An excess liability policy that requires the insured to retain a specified amount of loss from the first dollar during a specified period of time, usually one year; the insurer then pays all loss for that period that exceeds the retention, up to the policy limit. For example, an insured may incur several moderate losses during a policy. None of which exceed that each occurrence retention. Under a specific excess liability policy, insured would not be able to collect any insurance proceeds. With a combination, aggregate, excess and specific excess policy is a total of losses for the policy. Exceeded the aggregate retention then Sheard could collect insurance proceeds for the amount of loss in excess of the aggregate retention.

Large deductible plan 2.8

An insurance policy with a large per occurrence or per accident deductible of $100,000 or more. Insurance pays then the insured pays them back. Purposes and operations of large deductible plans They allow an organization to pay a reduced insurance premium for attaining losses below the deductible level. The organization transfers the financial consequences of losses that exceed the deductible to the insurer. As long as occurred insure settles each claim and then periodically bills insured organization for the amount of the loss and possibly also the claims handling expenses up to the deductible. Organization benefits from deferring cash outflows for its retained losses compared with paying a premium upfront. Organizations that choose large deductible plans usually make a commitment to controlling losses they would otherwise retain Example Worker's Compensation, automobile liability, and general liability loss exposures. Workers compensation deductibles can apply on a per person and/or per accident basis well auto liability deductibles usually apply on a per accident basis and general liability deductibles on a per occurrence basis

Large-line capacity 2.22

An insurer's ability to provide larger amounts of insurance for property loss exposures, or higher limits of liability for liability loss exposures, than it is otherwise willing to provide. Example a primary insurer may want to compete for homeowners policies in markets, where the value of the homes exceeds the amount the primary insurer can safely retain. Reinsurance allows the primary, ensure to increase its market share while limiting the financial consequences of potential losses.

Pathos

Appeal to emotion

Structuring an international insurance program 2.16

Businesses expand into the global market, to achieve their highest growth potential. Yet as a company expanding internationally, so does it's risk requiring it's risk management professional to carefully structure the corresponding insurance program. When structuring an international insurance program, an insurance, risk management, professional must decide whether the buy admitted insurance (for a decentralized structure), or non-admitted insurance (for a centralized structure) the most adventurous structure may turn out to be a package policy, such as exporters, who have no foreign, permanent place of business insure. For multinational companies with permanent foreign locations referred structure often includes a collection of admitted and not admitted insurance called a controlled master program. The type of policy that is specifically designed for the needs of an organization with growing foreign exposures, but no permanent office or other work place in any foreign country is often referred to as a exporters package policy, an international package policy, or a global insurance policy.

Catastrophe Protection 2.22

Catastrophe is a single event that causes widespread losses. Another function of reinsurance to protect against the financial consequences of a single task trophy, such as a flood, hurricane or wildfire that causes numerous insured losses in a concentrated area. Example: an insurer may purchase reinsurance that provides up to 200 million of coverage per hurricane, when the total losses from a single hurricane exceed the insured retention period without reinsurance, a catastrophe could greatly reducing insures earnings or even threatened it's solvency.

Reinsurance agreement 2.21

Contract between the primary insurer and reinsurer that stipulates the form of reinsurance and the type of accounts to be reinsured. The reinsurance agreement normally requires a primary insured to retain part of the loss exposures covered by the reinsurance agreement. This retention can be expressed as either a percentage of the original amount of insurance or a dollar amount of loss. The reinsurance agreement does not alter the insurance policies issued by the primary insurer or the primary insurers duties under those policies. The primary insurer pays a re-insurance premium for the protection provided just as any insured pays a premium for insurance coverage. However, because the primary insurance in cars expensive issue in the other line policy, the reinsurer often pays a seating commission to the primary ensure. These expenses consist primarily of commissions, paid to producers, premium, taxes, and underwriting expenses. After excepting a large risk from a primary insurer, reinsure may transfer part of it to other reinsures through an agreement called retrocession. Through retrocession, erase that is too big to be reinsured by one reinsure can be shared by money.

Benefits of large deductible plans 2.11

In organizations motive for having a large deductible plan is to reduce its cost of risk. Even though most of the premium reduction is offset because the organization must pay for its losses under the deductible, reducing the premium helps for two main reasons 1. States impose various charges, such as premium taxes and residual market loading's. A residual market loading is the amount charged to make up for losses in a state sponsored plan to ensure high-risk exposures such as an assigned risk plan for auto insurance a residual market loading is calculated based on a percentage of premium. 2. An insurance premium includes charges for the insurers overhead cost and profit. A large deductible plan can significantly reduce the cost of risk compared with other insurance plans by helping organizations avoid substantial premium taxes, residual market loading's, ensure overhead and profit charges. Some jurisdictions minimize these benefits by enforcing premium taxes and residual market loadings on the retained loss portion of large deductible plans Large deductible plans allow insured organizations to benefit from the cash flow available on the reserves fun set aside for retained losses and insured organization is not required to reimburse the insurer for the deductible amount until the insurer has paid covered losses. Large deductible plans enhances the insured organizations cash flow As with any risk Financing plan with a retention component losses under a large deductible plan may be higher than expected lowering in organizations net income and cash flow. However,By keeping its per current or accident and annual aggregate deductibles at prudent levels in organization can manage such uncertainty

Admitted Insurance 2.17

Insurance provided in a jurisdiction by an insurer that is license to do business in that jurisdiction. Decentralized structure

Large deductible difference from self insured retention SIR 2.8

Large deductibles and SIR's both require insurance to retain covered losses up to a specified amount. However there's a key difference in how they apply. With large deductibles the insurer adjusts and pays the tire loss and then bills insured for the deductible amount. With SIR's the insured is responsible for adjusting and paying its own losses up to the SIR amount Organizations with SARs frequently outsource these tasks to independent claims adjusting organizations Under a large double planned ensure address and pays all claims For a loss, even those below the deductible level and then seeks reimbursement from the insurer. In fact the insurer guarantees the payment of all claims a large deductible plan gives the insurer direct control over individual claims that's start out small but have the potential to exceed the deductible level.

Exporters Package Policy 2.18

Nonadmitted package policy tailored to organizations with incidental exposures in countries other than their home country. An international package policy our global insurance policy is separate from the organizations, domestic policies, and covers only international exposures. The policy can provide General liability coverage, foreign volunteer Worker's Compensation coverage, hired auto coverage, and a crime and fidelity coverage. Policy also offers coverage for personal property (such as laptops, projectors, and sale samples) The coverage needs of an insured with a permanent place of operation in one or more. Foreign countries may be better addressed by a controlled master program. Typically insured by insurers that are domiciled in the parent company's home country so these policies are non-admitted insurance in other countries. For that reason, any auto coverage included in such policies is provided as excess insurance, because compulsory auto liability insurance laws can usually be satisfied by admitted insurance .

Why reinsurance matters 2.21

Reinsurance is relevant to you as a risk manager, because your organization depends on the financial security of its insurers, which intern rely on it, reinsurance. Any disruption in your insurance reinsurance networks, such as the bankruptcy of a major insurer, is a potential threat to your risk financing program. Risk managers, sometimes deal directly with reinsures when they purchased reinsurance from a captive insurance subsidiary or obtain excess insurance layers directly in the reinsurance market. Reinsurance is transacted through a reinsurance agreement For example. It may state that the reinsurance must pay percentage of all the primary insurers losses for loss, exposures subject to the agreement, or must reimburse the primary insure for a loss that exceeds a specific amount. Additionally, the reinsurance agreement identifies the policy, group of policies, or other categories of insurance that are included in the reinsurance agreement.

Facultative Reinsurance 2.26

Reinsurance of individual loss exposures in which the primary insurer chooses which loss exposures to submit to the reinsurer, and the reinsurer can accept or reject any loss exposures submitted. With facilitative reinsurance, a primary ensure negotiate a separate reinsurance agreement for each lost exposure it reinsurers. The primary insurance, not obligated to purchase, reinsurance, and the reinsurer is not obligated to provide it. For that reason, facilitative reinsurance is also known as non-obligatory reinsurance. Facilitative reinsurance agreement is written for a specified time period And cannot be canceled by either party and less contractual obligations, such as payment of premiums, are not met. The reinsure issues, a facilitative certificate of reinsurance (or facilitative certificate), which is attached to the primary insurance copy of the underlying policy. Primary insurance purchase facilitative reinsurance mainly to reinsure, lost exposures that they do not typically ensure or that involve high levels of underwriting risk. As a result, primary insurance cover, if you were loss exposures with facilitative reinsurance than with treaty reinsurance. This type of insurance may be expensive for both the primary ensure and reinsure. And negotiating the primary insurer must provide extensive information about each lost exposure ceded and the reinsure must underwrite and price each submission. Treaty and facilitated reinsurance can be further categorized, according to how the primary ensure and the reinsure divide the obligations under the reinsurance agreement. The way reinsurers allocate losses are generally classified as pro rate in reinsurance and excess of loss reinsurance. These types of reinsurance reflect how the primary ensure and reinsure will share premiums, amounts of insurance, and losses.

Residual Risk

The level of risk remaining after actions are taken to alter the level of risk.

counterparty risk 2.20

The risk that the other party to an agreement will default

Eye contact (ethos)

When you're uncertain about appropriate eye contact, shift your vision from the other person's eyes to between the eyes, or to the nose or lower face, and then back again to the eyes

Ethos

credibility

Layers of liability insurance 2.13

helps an insurer avoid shock losses by limiting the amount it would have to pay for claims made against any one of its policyholders. The layered approach also enables an insurer to spread its risks among more policyholders, across more risk classifications, and through more territories. The primary (first) Layer consist of one or more primary liability policies. In many cases, mainly with large organization is the primary layer is self-insured Many organizations only have one layer in excess of the primary. An organization in this category has an umbrella liability policy above its primary general liability, commercial auto, and employers liability coverage. It may also have one or more separate excess liability policies, providing a second layer of coverage above other primary policies, such as management, liability, or environmental liability that are not covered by the umbrella policy. these layers, Dash primary, umbrella, liability, and the first layer of excess policies above primary policies, not covered by the umbrella Dash are generally referred to as the working layers Organizations that want higher limits of liability insurance above the working layers can purchase additional layers of excess liability insurance The number of layers varies, depending on the limits, desired by the organization, and the limits available from insurers. And layering insurance programs the term underlying is widely used to describe any policy or layer below a reference to excess policy or layer

Residual Market Loading 2.11

residual market loading is the amount charged to make up for losses in a state sponsored plan to ensure high-risk exposures such as an assigned risk plan for auto insurance a residual market loading is calculated based on a percentage of premium.

Duplication

risk retention and modification technique that creates backups of exposure units (duplication/separation/diversification are all techniques) - Creating copies of asset so if the primary asset is threatened the organization will still have the data/use available - good for files/documents

body language

sitting up and leaning slightly toward your audience can convey confidence in your message and interest in those around you

Working Layers 2.14

the layers of coverage in an org's insurance program that are most often called on to pay claims