RMI-4224 Lecture Notes - Lecture 1: Lightning, Estoppel, Reinsurance
22 Sep 2018
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Document Summary
Insurance: risk- the uncertainty of an event or a chance of loss, risk management- identifying exposures, assessing the exposures. Is a process: loss- the negative financial consequence of something happening, exposure- the thing or action that can cause loss, hazard- why if the road is wet, peril- how fire, lightning, riot, falling objects. Methods of handling risk: avoidance, retention- high deductible policies, segregation- instead of building a 4-story building, have 4 one story buildings, duplication, reduction- loss control, transfer- use of insurance, non-insurance transfer- llc, corporate veil. Law of large numbers: mathematical principle, probabilities are estimated, group- not individual basis, homogeneous exposure units, confidence in probabilities. Elements of an ideally insurable loss: definite loss, accidental- fortuitous, causes economic distress, large number of homogeneous units, probability is calculable, limited catastrophic exposure, feasible cost. Insurers: stock company- owned by stockholders, mutual company- owned by policyholders, fraternal benefit societies, reciprocals, llo(cid:455)d"s of london, governmental insurers.
