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RMI 211 MSU Exam 1 with Complete Solutions
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RMI 211 MSU Exam 1 with Complete Solutions
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RMI 211 MSU Exam 1 with CompleteSolutions
Admitted Assets - ANSWER-assets that an insurer can show on its statutory balance
sheet in determining its financial condition
Adverse Selection - ANSWER-the tendency of persons with a higher-than-average
chance of loss to seek insurance at standard rates
Capacity - ANSWER-Relative level of surplus
Captive Insurer - ANSWER-insurer owned by a parent firm for the purpose of insuring
the parent firm's loss exposures
Chance of Loss - ANSWER-the probability that an event will occur
Direct Loss - ANSWER-financial loss that results from physical damage, destruction, or
theft of property
Diversifiable Risk - ANSWER-affects only individuals or small groups (car theft). It is
also called nonsystematic or particular risk.
Enterprise Risk - ANSWER-encompasses all major risks faced by a business firm,
which include: pure risk, speculative risk, strategic risk, operational risk, and financial
risk
Expense Loading - ANSWER-the amount needed to pay all expenses, including
commissions, general administrative expenses, state premium taxes, acquisition
expenses, and an allowance for contingencies and profit
Fortuitous Loss - ANSWER-Unforeseen and unexpected loss that occurs as a result of
chance.
Hard Markets - ANSWER-high premiums
Hazard - ANSWER-Condition that creates frequency or severity of loss
High Exposure - ANSWER-high probability of loss
High Frequency - ANSWER-Many insurance claims
Indemnity - ANSWER-Insurance restores families to their former financial position
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