Risk Management Test 1 Set 1

Front 1

From the viewpoint of the insurer, what are the six requirements of an insurable risk

Back 1

1) There must be a large number of exposure units.
2) The loss must be accidental and unintentional
3) The loss must be determinable and measurable
4) The loss should not be catastrophic
5) The chance of loss must be calculable.
6) The premium must be economically feasible

Front 2

o Indemnification for loss (permits individuals and families to be restored to their former financial position after a loss occurs)
o Reduction of worry,
o Source of investment funds
o Loss prevention
o Enhancement of credit.

Back 2

social benefits of insurance

Front 3

o Cost of doing business
o Fraudulent claims
o Inflated claims

Back 3

social costs of insurance

Front 4

what are the steps in risk management?

Back 4

1) Identify loss exposures
2) Analyze the loss exposures
3) Select appropriate techniques for treating the loss exposures
4) Implement and monitor the risk management program

Front 5

refers to techniques that reduce the frequency and severity of losses

Back 5

risk control.
Avoidance, loss reduction, loss prevention.

Front 6

loss exposure is never acquired, or an existing loss exposure is abandoned

Back 6

avoidance

Front 7

measures that reduce the frequency of a particular loss. ex truck driver examinations

Back 7

ii. Loss prevention

Front 8

refers to measures that reduce the severity of a loss after it occurs. ex. sprinkler system to put out fire.

Back 8

loss reduction

Front 9

8. What are the basic methods for managing pure risks?

Back 9

risk control, risk financing

Front 10

refers to techniques that provide for the funding of losses

Back 10

risk financing. retention, ii. Non-insurance transfers, commercial interests

Front 11

means a firm retains part or all of the losses that can result from a given loss.

Back 11

retention

Front 12

methods other than insurance by which a pure risk and its potential financial consequences are transferred to another party.

Back 12

non insurance transfers

Front 13

commercial insurance is also used in a risk management program. Insurance is appropriate for loss exposures that have a low probability of loss by the severity of loss are high.

Back 13

commercial insurance

Front 14

9. What sources of information can the risk manager use for identifying loss exposures?

Back 14

o Risk analysis questionnaires
o Physical inspection
o Flowcharts
o Financial statements
o Historical loss data

Front 15

Examples of non insurance transfers include

Back 15

contracts, leases, and hold harmless agreements.

Front 16

Two methods for managing financial risk are

Back 16

hedging and using options.

Front 17

Financial risk management refers to the -- ------ and ----- of speculative financial risks.

Back 17

identification, analysis, and treatment

Front 18

speculative financial risks include

Back 18

a. Commodity price risk-the risk
b. Interest rate risk
c. Currency exchange risk

Front 19

An integrated risk program is a risk treatment technique that combines coverage for --------- in the same contract.

Back 19

pure and speculative risks

Front 20

is a risk treatment technique that combines coverage for pure and speculative risks in the same contract.

Back 20

An integrated risk program