RMI 2101 Lecture Notes - Lecture 6: Single Parent
31 Oct 2016
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Risk financing deals with sources of funds to pay for these losses. Seek external sources from third parties to financial losses. Still have the asset or activity exposed to loss. Transfer the financial responsibility for the loss, not the asset or activity itself (insurance) Transfer the financial responsibility of the loss to insurer. But not the asset or activity itself. Non-insurance risk transfers of the financing type. Tenant is responsible for all property losses while occupying the property. If the tenant fails in this responsibility, the owner is ultimately responsible for the losses. Company promises a firm doing work for them that they accept all responsibility. A firm of individual engaging in retention assumes the financial responsibility for the losses that do occur. Funded: a firm sets aside funds every period to pay for losses. Say a firm believes p* for a year is . 2 million. Better for losses that are predictable and high in severity.
