Chapter 3 Vocab (Text) Flashcards
Risk Management
a process that identifies loss exposures faced by an organization and selects the most appropriate techniques for treating such exposures
Loss Exposure
any situation or circumstance in which a loss is possible, regardless of whether a loss actually occurs
Loss Frequency
refers to the probable number of losses that may occur during some given time period
Loss Severity
refers to the probable size of the losses that may occur
Maximum Possible Loss
the worst loss that could happen to the firm during its lifetime
Probable Maximum Loss
the worst loss that is likely to happen
Risk Control
refers to techniques that reduce the frequency or severity of losses
Risk Financing
refers to techniques that provide for the funding of losses
Avoidance
means a certain loss exposure is never acquired or undertaken, or an existing loss exposure is abandoned
Loss Prevention
refers to measures that reduce the frequency of a particular loss
Loss Reduction
refers to measures that reduce the severity of a loss after it occurs
Retention
the firm retains part or all of the losses that can result from a given loss
Retention Level
The dollar amount of losses that the firm will retain
Captive Insurer
An insurer owned by parent firm for the purpose of insuring the parent firm’s loss exposures
Single Parent Captive
an insurer owned by only one parent, such as a corporation
Association or Group Captive
an insurer owned by several parents
Self-Insurance
a special form of planned retention by which part or all of a given loss exposure is retained by the firm
Risk Retention Group
group captive that can write any type of liability coverage except employers’ liability, workers compensation, and personal lines
Noninsurance Transfers
methods other than insurance by which a pure risk and its potential financial consequences are transferred to another party
Deductible
provision by which a specified amount is subtracted from the loss payment otherwise payable to the insured
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
Manuscript Policy
written for the firm, the language and meaning of the contractual provisions must be clear to both parties
Risk Management Policy Statement
outlines the risk management objectives of the firm, as well as company policy with respect to treatment of loss exposures
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.
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
Cost of Risk
risk management tool that measures certain costs