ARM 402

parametric trigger

What device connected to operational risk transfer arrangements mitigates the possibility of morale risk on the part of the transferring organization?

The basic premium

What is the charge that the insurer makes to cover its acquisition expenses, administration costs, profit, and the risk transfer charge under a retrospective rating plan?

surplus note

a type of unsecured debt instrument, issued only by insurers, that has 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

collaterize

the pledging of an asset to secure a loan or investment provides recourse in event of a default

securities

written instruments representing money or other property e.g. stocks and bonds

Basis Risk

risk that the amount an organization receives will be less, or more, than the actual loss sustained

management controls

specified system of standards/objectives by which an organization measures performance

contingent surplus note

surplus note designed so that the insurer can immediately obtain funds by issuing notes at pre-agreed rates of interest

Internal Control

system/process that an organization uses to achieve its goals

The excess loss premium

In a retrospective insurance rating plan, what is the premium the insurer charges for limiting individual losses?

Forward Contract

A bilateral contract that obligates one party to buy and the other to sell a specific quantity of an asset, at a set price, on a specific date in the future

Mission statement

A broad declaration of an organization's purpose that identifies the organization's products and customers and distinguishes the organization from its competitors.

special purpose vehicle

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.

Insurance-linked security

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

Reducing the cost of excess insurance

A group self-insurance plan helps its individual members manage their cost of risk in which way?

Transfer

Again with Prouty, which treatment is recommended for a risk that intersects at slight impact and moderate likelihood?

Losses retained by the captive are paid for by the insured as a premium

All of the following are advantages of captive insurer plans, EXCEPT:

Anti-Lock Braking System (ABS)

Allows the driver to stop without brake lockup. Standard equipment in many newer vehicles. Designed to be used by applying steady pressure on the brake pedal.

Risk Threshold

Amount of uncertainty an organization is willing to accept, either in aggregate or on a business until level, risk category or legal/regulatory compliance

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.

copyright

An exclusive right granted by the federal government allowing the owner to reproduce and sell an artistic or published work.

The amounts charged under the retrospective plan will be lower

An insured incurred a lower-than-average amount of losses during a policy period. How would the amounts charged as a final adjusted premium under a retrospective rating plan compare to that of a guaranteed-cost insurance plan designed to cover the same losses?

waiver

An intentional, knowing relinquishment of a legal right.

PESTLE analysis

Analysis of the external political, economic, social, technological, legal and environmental factors affecting a business

Vision Statement

Aspirational description of what organization will accomplish in the long term future

Correlation Matrix

Having developed the correlation coefficients for several combinations of risks, the risk manager can evaluate what could be the best pairings of risk to achieve corporate objectives by means of what device?

High Severity and low frequency

Insurance as a risk treatment plan is a good approach for risks that have what characteristics?

SWOT analysis

Matrix that enables analysis of internal strengths and weaknesses and external opportunities anb threats affective objective achievement

Porter's Five Forces

Method of evaluating five forces that affect organization's competitive environment

Operational

Organizations incur what type of risk from areas involving people, processes, systems, and external events?

Following Form

Organizations that wish higher limits of liability than are provided by their primary insurance policy purchase excess liability coverage. One form of this coverage provides excess limits of coverage only for events that are covered by the primary policy. This type of excess policy is known as:

Trade secret

Part of the success of the kTrap 1.0 is the circuit within it that broadcasts an exact frequency that diligent Kumquat researchers determined would attract mice. Without that frequency, the kTrap would be just another camera-integrated mousetrap. This closely-guarded frequency is known as a:

Noninsurance risk financing transfer

The Vendor agrees to indemnify and hold harmless the Plains Central School District, from and against any and all liability, claims, lawsuits (including attorneys' fees), and actions, as a result of work performed or services rendered under the contract, to the extent permissible by law. This agreement is what kind of transfer?

Risk Appetite

The amount of risk an entity is willing to take on, in order to achieve a given result.

strict liability

The legal responsibility for damage or injury even if you are not negligent

Control Environment

The overall attitude of management and employees about the importance of controls.

Exculpatory agreement

Tim's Trampoline Temple requires all jumpers to sign an agreement that says Tim's is released from liability for accidents that happen to jumpers. This is an example of what action to mitigate frequency of tort liability actions?

The total loss payments will be higher, increasing the retrospective rating plan premium for the policy period and subsequent periods after evaluations are applied.

What is the likely effect on an insured organization's retrospective rating plan if the insurer, over time, does not diligently adjust covered losses that fall within the organization's retention?

The right of its owner to exclude others from using it

What is the primary basis for the value of intellectual property?

Negative Correlation

What term represents the situation where the movement of the value of one variable upward corresponds with a movement downward in the value of another variable?

Modifications

When the potential causes are identified on the right side of the diagram and consequences on the left, the users can then identify actions that can 1) work to control the occurrences of the causes, and 2) deal with the consequences. What are these actions called?

The organization settles all claims up to the deductible, the insurer handles those above the deductible

Which of the following statements about the operation of a large deductible plan is inaccurate?

Tax multiplier

Which one of the following components of the retrospective rating formula allows for an amount to be added for state premium taxes, license fees, bureau charges, and residual market loadings?

Exploitation, Retention, Modification

Which risk treatment techniques are used to treat risks for which the organization wants to exploit an opportunity?

design patent

a patent that may be obtained for the ornamental nonfunctional design of an item

utility patent

a patent that protects the functionality of the invention

futures contract

a standardized, exchange-traded version of a forward contract

swap

agreement between two organizations where they exchange payments based upon changes in the value of an asset, yield, or index over a specific period

catastrophe put option

an arrangement where an organization arranges to sell its own stock at a predetermined price in event of a large loss

strategic risk

any factor that could affect the business

Blockchain

distributed digital ledger that enables secure transactions without the need for a third party

capital market

market where long term securities are traded

call option

option to buy a set amount of an underlying security at any time within a specified period

put option

option to sell a set amount of an underlying security at any time within a specified period

Strategic Management

process of identifying, describing, continually evaluating business decisions and strategies of organization to facilitate better performance and/or create competitive advantage