BU353 Study Guide - Midterm Guide: Legal Liability, Product Liability, Commercial Property
Document Summary
Make sure your example illustrates you understand the concept. Typically loss prevention/reduction applies to pure losses. Buying insurance is buying insurance: not loss prevention, expensing of losses, non-insurance transfer, etc. Buying features/forwards/derivatives/ils is non-insurance risk financing: not loss prevention/reduction or current expensing of losses. Non-insurance risk financing requires a 3rd party to share losses: not borrowing, issuing equity, setting up reserves, ex. Non-insurance risk financing is a contract that specifies the sharing/split of financing losses: non-insurance risk transfer is about risk ownership (hold harmless agreements, contractual transfer of risk) Current expensing of losses is retaining the losses: not borrowing, issuing new equities or setting up funds to pay for losses, ge(cid:374)e(cid:396)ally fo(cid:396) high f(cid:396)e(cid:395)ue(cid:374)cy, lo(cid:449) se(cid:448)e(cid:396)ity e(cid:448)e(cid:374)ts you do(cid:374)"t t(cid:396)ack ((cid:374)o sepa(cid:396)ate accounting entry)
