Fne375 Assignment 2

Risk Management and Insurance

Chu Hai College of Higher Education

2014-2015

Assignment 2

1. What is the underwriting cycle? Difference between a “hard” and a “soft” insurance market.

2. How does securitization of risk increase capacity in the property and casualty insurance industry?

3. a. Why is loss forecasting necessary when making a decision about whether to retain or transfer loss exposures?

b. What techniques can a risk manager use to predict future losses?

4. Integrated risk management programs are new to many risk managers and the insurance companies that offers such programs. What additional expertise, aside from knowledge of property and casualty insurance, must an insurance company possess to offer integrated risk management products?

5. Insurance contracts have certain legal characteristics that distinguish them from other contracts. Explain the following legal characteristics of insurance contracts.

a. Aleatory contract

b. Unilateral contract

c. Conditional contract

d. Personal contract

e. Contract of adhesion

6. Nicholas owns a laptop computer that was stolen. The laptop cost $2000 when it was purchased two years ago. A similar laptop computer today can be purchased for $1800. Assuming that the laptop was 50 percent depreciated at the time the theft occurred, what is the actual cash value of the loss?

7. a. Explain the principle of subrogation.

b. Why is subrogation used?

8. A risk management program must be implemented and periodically monitored to be effective. This step requires the preparation of a risk management policy statement and a risk management manual. The co-operation of other departments is also necessary.

a. What benefits can the firm expect to receive from a well-prepared risk management policy statement?

b. Identify several departments within a firm that are especially important in a risk management program.