Exam (elaborations)
RMIN 4000 UGA- Brown- exam 1|80 Accurate Q’s and A’s
- Course
- Institution
RMIN 4000 UGA- Brown- exam 1|80 Accurate Q’s and A’s
[Show more]
Content preview
RMIN 4000 UGA- Brown- exam 1|80 Accurate Q’s and A’s
Definition of risk - -A calculated possibility of a negative outcome
- calculated possibility - -probabilistic outcome, ranges from 0-1 (0-100%)
- negative outcome - -loss, must be quantifiable ($)
- frequency - --"how often does a loss occur?"
-number of losses in a certain time period
-probability of a loss
- Severity - --"how much does it cost when a loss occurs?"
- dollar amount
- how to calculate frequency - -# of losses/# of exposures
- how to calculate severity - -total losses ($)/# number of losses
- peril - -cause of loss (ex: fire)
- hazard - -condition that creates or increases frequency of a loss. 4 types:
physical, moral, morale (attitudinal), legal
- physical hazard - -a physical condition that increases the frequency or
severity of loss
- moral hazard - -the presence of insurance changes the behavior of the
insured (ex: faking damages or exaggerating value of insured property)
- Morale (attitudinal) hazard - -carelessness or indifference to a loss
because of the existence of insurance, increases frequency and severity (ex:
leaving keys in car, ignoring limbs)
- legal hazard - -characteristics of the legal system or regulatory
environment that increase the frequency or severity of losses (ex: different
juries in different areas, diminution in value laws)
- pure risk - -loss or no loss (no gain), insurable (ex: fire or cancer)
- speculative risk - -A chance of loss, no loss, or gain. (ex: gambling or
investing), not always insurable
, - diversifiable risk - --affects only small groups not whole economy
-can be reduced/eliminated thru diversification
-risks aren't correlated (fire, theft, collision)
- nondiversifiable risk - --affects entire economy
-cannot be reduced thru diversififcation
-gov. assistance may be needed to insure
-risks are correlated (inflation, unemployment)
-ex: flood, earthquake
- enterprise risk - -encompasses all major risks faced by a business: pure,
speculative, operational, and financial
- systemic risk - --risk collapse of an entire system or entire market due to a
failure of a single entity or group of entities that can result in a breakdown of
the entire financial system
-instability in the financial system due to interdependency between the
players and the market
- types of pure risks - --personal
-property
-liability
-loss of business income
-cyber security
- personal risk - --directly affects individual or family, involves a possibility
of loss of income, extra expenses, or depletion of financial assets
-perils maybe involved: death, unemployment, disability/injury/poor health,
inadequate retirement income
- property risk - --possibility of losses associated with the destruction of
property
-direct loss: cost to replace damaged property
-indirect loss: financial loss resulting as a consequence of the direct loss (ex:
having to pay to live somewhere while home is being repaired from fire
damages)
- liability risk - --legal liability (financial consequences)
-no upper limit
-liens can be placed on income, assets seized
-defense costs- lawyers
- loss of business income - --if a business has to shut down for a period due
to physical damages and cannot generate income
-indirect loss
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Nursephil2023. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $12.49. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67096 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now