Exam (elaborations)
ARM 402 - Successfully Treating Risk: Q’s And A’s
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ARM 402 - Successfully Treating Risk: Q’s And A’s
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ARM 402 - Successfully Treating Risk: Q’s And A’sRisk Treatment Right Ans - The selection and implementation of actions to
help manage or mitigate a risk.
Residual Risk Right Ans - The level of risk remaining after actions are taken
to alter the level of risk.
Avoidance Right Ans - A risk control technique that involves ceasing or
never undertaking an activity so that the possibility of a future loss occurring
from that activity is eliminated.
Loss Prevention Right Ans - A risk control technique that reduces the
frequency of a particular loss.
Loss Reduction Right Ans - A risk control technique that reduces the
severity of a particular loss.
Risk Transfer Right Ans - The shifting of risk from one individual or
organization to another.
Retention Right Ans - A risk financing technique that involves assumption
of risk in which gains and losses are retained within the organization.
Risk Financing Right Ans - A risk management technique that includes
steps to pay for or transfer the cost of losses.
Internet of Things (IoT) Right Ans - A network of objects that transmit data
to computers.
Telematics Right Ans - The use of technological devices in vehicles with
wireless communication and GPS tracking that transmit data to businesses or
government agencies; some return information for the driver.
Machine Learning Right Ans - Artificial intelligence in which computers
continually teach themselves to make better decisions based on previous
results and new data.
,Hedging Right Ans - A financial transaction in which one asset is held to
offset the risk associated with another asset.
Derivative Right Ans - A financial instrument whose value is derived from
the value of an underlying asset, which can be an index, an asset, yield on an
asset, weather conditions, inflation, loans, bonds, an insurance risk, or other
items.
Diversification Right Ans - A risk control technique that spreads loss
exposures over numerous projects, products, markets, or regions.
Pure Risk Right Ans - A chance of loss or no loss, but no chance of gain.
Speculative Risk Right Ans - A chance of loss, no loss, or gain.
Covariance Right Ans - The relative association between variables to move
in tandem or independently of each other.
Correlation Right Ans - A relationship between variables.
Insurance Right Ans - A risk management technique that transfers the
potential financial consequences of certain specified loss exposures from the
insured to the insurer.
Excess Liability Policy Right Ans - A policy that covers liability claims in
excess of the limits of an underlying policy or a stated retention amount.
Layering Right Ans - Successive levels (or layers) of coverage using an
excess of loss strategy in which each layer is in excess of the lower limits
provided by another insurer, resulting in a structured program of high limits
of coverage.
Working Layers Right Ans - The layers of coverage in an organization's
insurance program that are most often called on to pay claims.
Following form Excess Liability Policy Right Ans - An excess liability policy
that covers a claim in excess of the underlying limits only if the loss is covered
by the underlying insurance.
,Self-Contained Excess Liability Policy Right Ans - An excess liability policy
that is subject to its own provisions only and does not depend on the
provisions of the underlying policies for determining the scope of its coverage.
Umbrella Liability Policy Right Ans - A liability policy that provides excess
coverage above underlying policies and may also provide coverage not
available in the underlying policies, subject to a selfinsured retention.
Self Insured Retention (SIR) Right Ans - An amount that is deducted from
claims that are payable under an umbrella liability policy and that are not
covered at all by any primary policy.
Drop-Down Coverage Right Ans - Coverage provided by many umbrella
liability policies for (1) claims not covered at all by the underlying policies and
(2) claims that are not covered by an underlying policy only because the
underlying policy's aggregate limits have been depleted.
Specific Excess Liability Policy Right Ans - An excess liability policy that
requires the insured to retain a stipulated amount of liability loss from the
first dollar for all losses resulting from each single occurrence or accident.
Aggregate Excess Liability Policy Right Ans - An excess liability policy that
requires the insured to retain a specified amount of loss from the first dollar
during a specified period of time, usually one year; the insurer then pays all
loss for that period that exceeds the retention, up to the policy limit.
Admitted Insurance Right Ans - Insurance provided in a jurisdiction by an
insurer that is licensed to do business in that jurisdiction.
Non-admitted Insurance Right Ans - Insurance provided in a jurisdiction by
an insurer that is not licensed to do business within that jurisdiction.
Exporters Package Policy Right Ans - Nonadmitted package policy tailored
to organizations with incidental exposures in countries other than their home
country.
Counterparty Risk Right Ans - The risk that the other party to an
agreement will default.
, Primary Insurer Right Ans - In reinsurance, the insurer that transfers or
cedes all or part of the insurance risk it has assumed to another insurer in a
contractual arrangement.
Large Line Capacity Right Ans - A primary insurer's ability to provide a
large amount of insurance under a single policy.
Professional Reinsurer Right Ans - An insurer whose primary business
purpose is serving other insurers' reinsurance needs.
Reinsurance Intermediary Right Ans - An intermediary that works with
primary insurers to develop reinsurance programs and that negotiates
contracts of reinsurance between the primary insurer and reinsurer, receiving
commission for placement and other services rendered.
Reinsurance Agreement Right Ans - Contract between the primary insurer
and reinsurer that stipulates the form of reinsurance and the type of accounts
to be reinsured.
Retention Right Ans - The amount retained by the primary insurer in the
reinsurance transaction.
Ceding Commission Right Ans - An amount paid by the reinsurer to the
primary insurer to cover part or all of the primary insurer's policy acquisition
expenses.
Retrocession Right Ans - A reinsurance agreement whereby one reinsurer
(the retrocedent) transfers all or part of the reinsurance risk it has assumed
or will assume to another reinsurer (the retrocessionaire).
Catastrophe Right Ans - A single event that causes widespread losses.
Capacity ratio (premiumto-surplus ratio) Right Ans - A leverage ratio that
indicates an insurer's financial strength by relating net written premiums to
policyholders' surplus.
Policyholders Surplus Right Ans - An insurer's assets minus its liabilities,
which represents its net worth.
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