REVIEW GUIDE – BUSA 308

Chapter 1

1) Distinguish between the following:

(1) objective risk vs. subjective risk;

(2) pure vs. speculative risk;

(3) peril vs. hazard

2) Define: physical hazard, moral hazard, attitudinal hazard, and legal hazard.

3) What is the primary difference between a diversifiable risk and a nondiversifiable risk?

4) Define Enterprise risk management.

5) What are the major personal risks?

6) With property risk, what is the difference between a direct vs. indirect loss?

7) Define a personal liability risk and give an example.

8) Name some major commercial risks.

9) Major categories of risk control are avoidance, loss prevention, and loss reduction. Be able to name some examples of each.

10) What are the major techniques used in risk financing?

Chapter 2

1) Define these elements of an insurance plan:

(1) Pooling of losses,

(2) payment of fortuitous losses,

(3) risk transfer,

(4) and indemnification.

2) What are the characteristics of an ideal insurable risk?

3) What is adverse selection?

4) Distinguish between insurance vs. gambling; insurance vs. hedging.

5) Discuss the benefits vs. the costs of insurance on society.

Chapter 3

1) What are some pre-loss and post-loss objectives in risk management?

2) Be able to name/identify various loss exposures (e.g., property loss exposure, business income loss exposure……)

3) Know the four steps in any risk management process.

4) Be able to discuss techniques for controlling risk, and risk financing.

5) What is a captive insurer, and what are some major reasons why a company would create one?

6) What types of situations are more appropriate for using retention to control risk? For using insurance to control risk?

7) What is the underwriting cycle? Give some examples.

Chapter 4

1) Define financial risk management, including

(1) commodity price risk,

(2) interest rate risk,

(3) currency exchange rate risk.

2) What is the role of a CRO (chief risk officer)? (Include a definition of an integrated risk program).

3) ERM includes some emerging risks such as Terrorism risk and Climate change risk. What types of businesses can be affected by each of these risks?

4) What is TRIPRA?

5) Define: Hard vs. Soft insurance markets; combined ratio; surplus; clash loss (not to be confused with clash of the titans); catastrophe bonds; weather option; RMIS system; risk map.

6) Discuss insurance industry consolidation.

Chapter 5

1) Distinguish between the different types of insurers:

(1) Stock, Mutual, Lloyd’s of London,

(2) Reciprocal exchange,

(3) Blue Cross & Blue Shield Plans,

(4) HMOs,

(5) Captive Insurers

2) Distinguish between an agent and a broker.

3) Define: Surplus lines; holding company; independent agency

4) What are some major distribution systems used to market life insurance?

Property and Casualty insurance?

Chapter 6

1) Discuss the different job areas (and jobs) in the operations of an insurance company:

Rating/ratemaking – Actuary; Underwriting; Production – Agent; Claims – Company vs. independent vs. public adjustor; Reinsurance; Investments; IT; Accounting.

2) Define:

(1)Adverse selection;

(2) CLU; CPCU;

(3)CFP; Retention limit;

(4)ceding company;

(5)cession;

(6) retrocession;

(7)unearned premium reserve.

3) What is the reason for reinsurance?

5) Distinguish between the 2 major types of reinsurance: Facultative vs. Treaty.

6) Distinguish between different reinsurance methods:

(1) Quota-share treaty,

(2) surplus-share treaty,

(3) excess-of-loss reinsurance,

(4) and reinsurance pool.

Be able to determine the portion of a claim that the insured and insurance companies will have to pay.

6) How do investments of a life insurance company differ from that of a property and casualty insurance company?