Chapter28-Accepting risk

Question 1

Framework

Answer 1

1 Quantifiable risk appetite statement
2 Factors influencing risk appetite
3 Market for risk
4 Risk efficient market for risk transfer
5 Examples of different risk appetites in an insurance context
6 CIS as risk transfer
7 Risk and product design
8 Insurable risk
9 Risk pooling
10 Additional Insurable risk (MUD PIS)

Question 2

Insurable risk (3)

Answer 2

1. The policyholder must have an interest in the risk being insured, to distinguish between insurance and a wager.
2. The risk must be of a financial and reasonably quantifiable nature.
3. The amount payable in the event of a claim must bear some relationship to the financial loss incurred.

Question 3

Additional Insurable risk (6)

Answer 3

Moral hazard eliminated as far as possible

Ultimate limit on liability undertaken

Data exists with which to price risk

Pooling a large number of similar risks

Independent risk events

Small probability of occurrence