Chapter 3 Vocab (Text) Flashcards Preview

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Flashcards in Chapter 3 Vocab (Text) Deck (26):
1

Risk Management

a process that identifies loss exposures faced by an organization and selects the most appropriate techniques for treating such exposures

2

Loss Exposure

any situation or circumstance in which a loss is possible, regardless of whether a loss actually occurs

3

Loss Frequency

refers to the probable number of losses that may occur during some given time period

4

Loss Severity

refers to the probable size of the losses that may occur

5

Maximum Possible Loss

the worst loss that could happen to the firm during its lifetime

6

Probable Maximum Loss

the worst loss that is likely to happen

7

Risk Control

refers to techniques that reduce the frequency or severity of losses

8

Risk Financing

refers to techniques that provide for the funding of losses

9

Avoidance

means a certain loss exposure is never acquired or undertaken, or an existing loss exposure is abandoned

10

Loss Prevention

refers to measures that reduce the frequency of a particular loss

11

Loss Reduction

refers to measures that reduce the severity of a loss after it occurs

12

Retention

the firm retains part or all of the losses that can result from a given loss

13

Retention Level

The dollar amount of losses that the firm will retain

14

Captive Insurer

An insurer owned by parent firm for the purpose of insuring the parent firm's loss exposures

15

Single Parent Captive

an insurer owned by only one parent, such as a corporation

16

Association or Group Captive

an insurer owned by several parents

17

Self-Insurance

a special form of planned retention by which part or all of a given loss exposure is retained by the firm

18

Risk Retention Group

group captive that can write any type of liability coverage except employers' liability, workers compensation, and personal lines

19

Noninsurance Transfers

methods other than insurance by which a pure risk and its potential financial consequences are transferred to another party

20

Deductible

provision by which a specified amount is subtracted from the loss payment otherwise payable to the insured

21

Excess Insurance

a plan in which the insurer dose not participate in the loss until the actual loss exceeds the amount a firm has decided to retain

22

Manuscript Policy

written for the firm, the language and meaning of the contractual provisions must be clear to both parties

23

Risk Management Policy Statement

outlines the risk management objectives of the firm, as well as company policy with respect to treatment of loss exposures

24

Risk Management Manual

describes in some detail the risk management program of the firm and can be a useful tool for training managers, supervisors, and new employees who will be participating in the program.

25

Personal Risk Management

refers to the identification and analysis of pure risks faced by an individual or family, and to the selection and implementation of the most appropriate technique(s) for treating such risks

26

Cost of Risk

risk management tool that measures certain costs