RSK4803 Latest exam pack questions and answers and summarized notes for exam preparation. Updated for 2024 exams . For assistance Whats-App.0.6.7..1.7.1..1.7.3.9 . All the best on your exams!!
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1.a. Distinguish between risk and uncertainty by using the game of chance in a casino as an
example. (4 marks)
1.b. From the example used in Question 1a, explain how uncertainty may influence risk
financing decisions. (4 marks)
Question 2 [22 Marks]
2.a. Distinguish between risk appetite and risk tolerance. (6 marks)
2.b. Explain how the risk appetite and the risk tolerance of an enterprise can influence both
pre-loss and post-loss risk financing decisions. (16 marks)
Question 3 [15 Marks]
3.a. Critically evaluate the following statement: “The purchase of insurance enables
enterprises to totally transfer the ownership of the risk”. (5 marks)
3.b. Explain the concept of moral hazard. (5 marks)
3.c. What are the measures that an insurer can use to reduce moral hazard? (5 marks)
Question 4 [15 Marks]
4.a. Argue the benefits of a deductible programme as part of the risk retention strategy from
the perspective of the insured. (8 marks)
4.b. Libre Logistics Ltd. insures against accidents of its motor fleet. The fleet consists of highly
specialised, imported refrigerator trucks. Contributing factors to the high value of incidents
are the poor conditions of the municipal and provincial roads and the quality of drivers.
Calculate the optimum deductible according to the total expected cost (TEC) rule and
argue which quote is the most appropriate by using the given loss experience of the
company. Show all calculations. (7 marks)
Table 1: Loss experience of the motor fleet over the last five years
Year No. of vehicles Average loss per No of accidents Total cost for the
event year
1 20 R1,500,000 10 R15,000,000
2 20 R2,200,000 12 R26,400,000
3 25 R1,750,000 15 R26,250,000
4 30 R2,000,000 20 R40,000,000
5 50 R3,500,000 25 R87,500,000
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