Exam (elaborations)
RMIN 4000 Test 1 Brown UGA
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RMIN 4000 Test 1 Brown UGA
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Name: Score:97 Multiple choice questions
Term 1 of 97
Indemnification
The insured is restored to his or her approximate financial position prior to the occurrence
of the loss
The insured is compensated only for physical damages, not financial losses.
The insured must repay the insurer for any claims made.
The insured receives a fixed sum regardless of their financial position.
Definition 2 of 97
can help a firm when insurance is expensive and difficult to obtain
lower costs
lower tax rate
easier access to reinsurance market
possibility of favorable regulatory enviornment
Advantages of Retention
Advantages of a Captive
Benefits of Risk Management
Group Captive
,Definition 3 of 97
allows the pooling technique to work ex: flood, earthquake, hurricane
Loss must be fully covered by the insurer.
High frequency, high severity
Loss should not be catastrophic to insurer
Loss can be ignored if it occurs infrequently.
Definition 4 of 97
appropriate for low-frequency, high-severity loss exposures
Hard Market
Excess Insurance
Risk Management
Commercial Insurance
Definition 5 of 97
-Enables firm to attain its pre-loss and post-loss objectives more easily
-A risk management program can reduce a firm's cost of risk
-Reduction in pure loss exposures allows a firm to enact an enterprise risk management program
to treat both pure and speculative loss exposures
-Society benefits because both direct and indirect losses are reduced
Benefits of Risk Management
4 Steps in Risk Management Process
advantages of commercial insurance
advantages of non-insurance transfer
,Definition 6 of 97
a risk that can directly affect an individual or a family; loss of income, extra expenses, and
depletion of financial assets
Property risk
Personal risk
Pure risk
Liability risk
Term 7 of 97
Developing cancer or your house being caught on fire are two examples of what kind of risk?
Pure Risk
Hazard
Risk Financing
Speculative Risk
Term 8 of 97
Risk Transfer
Techniques that reduce the frequency or severity of losses
Is one that is unforeseen, unexpected, and occur as a result of chance
A pure risk is transferred from the insured to the insurer, who typically is in a stronger
financial position
a special form of planned retention by which part or all of a given loss exposure is retained
by the firm
, Term 9 of 97
Retention is a ___ _____________ technique in which you retain part or all of losses that can occur from a
given risk.
Risk Financing
Liability Transfer
Loss Mitigation
Asset Depreciation
Term 10 of 97
__________________ _____________ is a risk financing technique in which you transfer liability by contract,
hedging, or incorporation.
Non-Insurance transfer.
Loss forecasting
Risk pooling
Insurance underwriting
Term 11 of 97
Physical Hazard
a financial strategy that minimizes risks
a legal requirement that ensures safety
a physical condition that increases the frequency or severity of loss
an emotional state that leads to better decision-making
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