risk managmentfd

What Indemnification mean?

that the insured is restored to his or her approximate financial position prior to the occurrence of the loss

6 characteristics of insurance

■ There must be a large number of exposure units. ■ The loss must be accidental and unintentional. ■ The loss must be determinable and measurable. ■ The loss should not be catastrophic. ■ The chance of loss must be calculable. ■ The premium must be economically feasible.

What is subjective risk and how are they different?

(perceived risk) is defined as uncertainty based on a person's mental condition or state of mind.

Insurance & gambling

First, gambling creates a new speculative risk, whereas insurance is a technique for handling an already existing pure risk.

Different types of hazards and different types of risks

Hazard Physical hazard ■ Moral hazard ■ Attitudinal hazard (morale hazard) ■ Legal hazard Risk ■ Pure and speculative risk ■ Diversifiable risk and nondiversifiable risk ■ Enterprise risk ■ Systemic risk

A large number of exposure units. Required be before persist is insurable with an appointment the sentence together

Ideally, there should be a large group of roughly similar, but not necessarily identical, exposure units that are subject to the same peril or group of perils.

What about objective probability

Objective probability refers to the long-run relative frequency of an event based on the assumptions of an infinite number of observations and of no change in the underlying conditions

What is the objective risk?

Objective risk (also called degree of risk) is defined as the relative variation of actual loss from expected loss.

Pre loss and post-loss objectives?

Pre loss- economy, reduction of anxiety, meeting legal obligations. Post loss-survival of the firm, continue operating, Stability of earnings, Continued growth of the firm, Social responsibility.

retention

Risk management technique in which an individual or a firm retains part or all of the losses resulting from a given loss exposure. Used when no other method is available, the worst possible loss is not serious, and losses are highly predictable.

Los frequency

The probable number of losses that may occur during some given time period.

Loss severity

The probable size of the losses that may occur.

who's underwriting me what do underwriters do

The selection and classification of applicants for insurance through a clearly stated company policy consistent with company objectives.

characteristics of an ideally insurable risk except

There must be a large number of exposure units. ■ The loss must be accidental and unintentional. ■ The loss must be determinable and measurable. ■ The loss should not be catastrophic. ■ The chance of loss must be calculable. ■ The premium must be economically feasible.

Maximum possible loss

Worst loss that could happen to a firm during its lifetime

What is the pure risk?

a situation in which there are only the possibilities of loss or no loss

Company the becomes insolvent

advance is worthless. Therefore, to ensure that claims will be paid, the financial strength of insurers must be carefully monitored. A second reason for stressing solvency is that individuals are exposed to great economic insecurity if insurers fail and outstanding claims are not paid. For example, if the insured's home is totally destroyed by a hurricane and the loss is not paid, he or she may be financially ruined. Thus, because of possible financial hardship to insureds, beneficiaries, and third-party claimants, regulation must stress the solvency of insurers. A third reason for regulation is that when insurers become insolvent, certain social and economic costs are incurred. Examples include the loss of jobs by insurance company employees, a reduction in premium taxes paid to the states, and a "freeze" on the withdrawal of cash values by life insurance policyholders. These costs can be minimized if insolvencies are prevented. Insurer solvency is an important issue that is discussed in greater detail under current issues in insurance regulation.

What is a moral hazard?

dishonesty or character defects in an individual that increase the frequency or severity of loss

Difference between a domestic insurer, foreign, alien insurer

domestic insurer is an insurer domiciled in the state; it must be licensed in the state as well as in other states where it does business. A foreign insurer is an out-of-state insurer that is chartered by another state; it must be licensed to do business in the state. An alien insurer is an insurer chartered by a foreign country. It must also meet certain licensing requirements to operate in the state.

fortuitous loss

fortuitous loss is one that is unforeseen and unexpected by the insured and occurs as a result of chance.

What is a hazard?

is a condition that creates or increases the frequency or severity of loss.

Risk management? Whats about?

is a process that identifies loss exposures faced by an organization and selects the most appropriate techniques for treating the loss exposures. Because the term risk is ambiguous and has different meanings, risk managers typically use the term loss exposure to identify potential losses.

What is a binder and when is appropriate

is a temporary contract for insurance and can be either written or oral.

Reinsurance

is an arrangement by which the primary insurer that initially writes the insurance transfers to another insurer (called the reinsurer) part or all of the potential losses associated with such insurance.

attitudinal hazard? Which used to be called and still this in other places morale.

is carelessness or indifference to a loss, which increases the frequency or severity of a loss

A peril? What does peril mean, the definition and examples and activities

is defined as the cause of loss. If your house burns because of a fire, the peril, or cause of loss, is the fire.

subjective probabilities?

is the individual's personal estimate of the chance of loss

pooling losses

is the spreading of losses incurred by the few over the entire group, so that in the process, average loss is substituted for actual loss

What is adverse selection? How does that work

n is the tendency of persons with a higher-than-average chance of loss to seek insurance at standard (average) rates, which, if not controlled by underwriting and policy provisions, results in higher-than-expected loss levels and unprofitable business.. For example, smokers have higher mortality rates than non-smokers and must pay substantially higher rates for life insurance. Some smokers might conceal or provide false information to obtain life insurance at a lower rate.

physical hazard

physical hazard is a physical condition that increases the frequency or severity of loss

legal hazards

refers to characteristics of the legal system or regulatory environment that increase the frequency or severity of losses.

Underwriting

refers to the process of selecting and classifying applicants for insurance.

And how is that different than the maximum probable loss

s is the worst loss that is likely to happen. For example, if a plant is totally destroyed by a flood, the risk manager estimates that replacement cost, debris removal, demolition costs, and other costs will total $50 million. Thus, the maximum possible loss is $50 million.The risk manager also estimates that a flood causing more than $40 million of damage to the plant is so unlikely that such a flood would not occur more than once in 100 years. The risk manager might choose to ignore events that occur so infrequently. Thus, for this risk manager, the probable maximum loss is $40 million.

Law of large numbers

states that the greater the number of exposures, the more closely will the actual results approach the probable results that are expected from an infinite number of exposures.

What is risk mean?

uncertainty concerning the occurrence of a loss.