R M I 300 Study Guide - Comres, European Cooperation In Science And Technology, Gif

• School: UW-Madison
• Department: Risk Management and Insurance
• Course: R M I 300
• Professor: All

Document Summary

Distinguish it as risk transfer technique: financial intermediation, specific financial agreement between parties, fixed amount of money payed for a promise of future. Larger payment: contractual relationship, multiple parties involved in contract & each has rights. Pooling of fortuitous losses by a transfer of risk to insurers who agree to indemnify insureds for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with the risk . Basic characteristics of insurance definition (all are neccesssary) Losses are completely random, unexpected, unforsen, unintentional (by insured) Restore them to same financial standing they were in before loss. The more you adhere to better mechanism will work. Large number of homogeneous units (car insurance great probability) (aliens insurnce wouldn t work) Accidental and unintentional losses (fortuitous loss, unforseen, not intentional) Non-catastrophic losses (when insurance company loses entire pool) In theory insurance companies can do this but premiums would be. Crop failure yes (as long as non catostrophic)