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