Risk Management Test 1 Set 2

Front 1

a comprehensive risk management program that addresses an organization’s pure risks, speculative risks, strategic risks and operational risks.

Back 1

enterprise risk management

Front 2

the risk of losing money if the price of a commodity changes. Futures contracts can be used to hedge a commodity price risk.

Back 2

commodity price risk

Front 3

the risk of loss caused by adverse interest rate movements

Back 3

b. Interest rate risk:

Front 4

the risk of loss of value caused by changes in the rate at which one nation’s currency may be converted to another nation’s currency.

Back 4

currency exchange risk

Front 5

call features on bonds and adjustable interest rate mortgages, options contracts, forward contracts, futures contracts and interest rate swaps.

Back 5

ways to manage financial risk

Front 6

a legal wrong for which the law allows a remedy in the form of money damages.

Back 6

tort

Front 7

The three types of torts are:

Back 7

1) Intentional torts
2) Strict liability
3) Negligence

Front 8

is defined as the failure to exercise the standard of care required by law to protect others from an unreasonable risk of harm.

Back 8

negligence

Front 9

4 essential elements of negligence:

Back 9

1) Existence of a legal duty
2) Failure to perform that duty
3) Damage or injury to the claimant
4) Proximate cause relationship between the negligent act and the infliction of damages.

Front 10

means that if the injured person’s conduct falls below the standard of care required for his or her protection, and such conduct contributed to the injury, the injured person cannot collect damages. (e.g. slowing down with out signaling and being rear ended by another driver. The failure to signal could constitute -------- -------.)

Back 10

contributory negligence

Front 11

if both the plaintiff (injured person) and the defendant contribute to the plaintiff’s injury, the financial burden of the injury is shared by both parties according to their respective degrees of fault.

Back 11

comparative negligence

Front 12

means “the thing speaks for itself.” Under this doctrine the very fact that the injury or damage occurs establishes a presumption of negligence on behalf of the defendant. It is then up to the defendant to refute the presumption of negligence. (e.g. Dentist extracts wrong tooth, surgeon leaves a surgical sponge in patient’s abdomen.)

Back 12

Res ipsa loquitur

Front 13

a. The event is one that normally does not occur in the absence of negligence
b. The defendant has exclusive control over the instrumentality causing the accident
c. The injured party has not contributed to the accident in any way.

Back 13

requirements of Res ipsa loquitur

Front 14

Under this rule, several people may be responsible for the injury, but a defendant who is only slightly responsible may be required to pay the full amount of damages. This could happen if one defendant had substantial financial assets, and the other defendants had few or no assets.

Back 14

joint and several liability

Front 15

Under this rule the defendant cannot introduce any evidence that shows the injured party has received compensation from other collateral sources.

Back 15

collateral sources

Front 16

The cyclical pattern in underwriting stringency, premium levels, and profitability is referred to as the

Back 16

underwriting cycle

Front 17

Property and liability insurance markets fluctuate between periods of tight underwriting standards and high premiums, called a ------- insurance market, and periods of loose underwriting standards and low premiums, called a ---- insurance market.

Back 17

hard, soft

Front 18

o Stock insurers
o Mutual insurers
o Reciprocal exchanges
o Lloyd’s of London
o Blue Cross and Blue Shield plans
o Health maintenance organizations (HMO’s)
o Other insurers included captive insurers and savings bank life insurance (SBLI)

Back 18

common forms of insurance organization

Front 19

represents the insurer. represents the insured

Back 19

agent, broker

Front 20

a special type of broker who is licensed to place business with a non admitted insurer. Non admitted insurers are insurers not licensed to business in the state.

Back 20

surplus lines broker