TABLE OF CONTENTS
Table Of Contents ………………………………………………………………………………………………………………………… 2
Lesson 1………………………………………………………………………………………………………………………………………. 5
1. Concepts In Risk Management…………………………………………………………………………………………………… 5
1.1. Objectives…………………………………………………………………………………………………………………………. 5
1.2 Types Of Risks………………………………………………………………………………………………………………….. 5
1.3 Summary…………………………………………………………………………………………………………………………… 9
1.4 Questions………………………………………………………………………………………………………………………….. 9
Lesson 2………………………………………………………………………………………………………………………………….. 10
2.0 The Nature Of Risk And Methods Of Handling Risk………………………………………………………………… 10
2.1 Objectives………………………………………………………………………………………………………………………… 10
2.2. Nature Of Risk ……………………………………………………………………………………………………………….. 10
2.3 Methods Of Handling Risk…………………………………………………………………………………………….. 12
2.4 Questions………………………………………………………………………………………………………………………… 14
Lesson 3………………………………………………………………………………………………………………………………….. 16
3.0 Introduction…………………………………………………………………………………………………………………….. 16
3.1 Objectives……………………………………………………………………………………………………………………….. 16
3.2 Environment Of Insurance Business ……………………………………………………………………………………….. 16
3.3 Elements Of An Insurance Contract………………………………………………………………………………………… 17
3.4 Insurable And Non-Insurable Risks…………………………………………………………………………………………. 18
3.5 Summary…………………………………………………………………………………………………………………………. 20
3.6 Questions………………………………………………………………………………………………………………………… 20
Lesson 4………………………………………………………………………………………………………………………………….. 21
4. Analysis Of Insurable Risks And The Social- Economic Values Of Insurance ……………………………… 21
4.0 Introduction…………………………………………………………………………………………………………………….. 21
4.1 Objectives……………………………………………………………………………………………………………………….. 21
4.2 Analysing Non-Insurable Risks………………………………………………………………………………………………. 21
4.3 Insurance ,Gambling And Speculation …………………………………………………………………………………….. 21
4.4 Social And Economic Values Of Insurance ……………………………………………………………………………… 22
4.5 Business And Social Stability…………………………………………………………………………………………………. 23
4.6 Social Costs Of Insurance……………………………………………………………………………………………… 23
4.7 Summary…………………………………………………………………………………………………………………………. 24
4.8 Questions………………………………………………………………………………………………………………………… 24
Lesson 5………………………………………………………………………………………………………………………………….. 26
5. Risk Management Functions And Methods Of Handling Risk ………………………………………………………. 26
5.0 Introduction…………………………………………………………………………………………………………………….. 26
5.1 Objectives……………………………………………………………………………………………………………………….. 26
5.2 Authority And Responsibility Of Risk Managers………………………………………………………………………. 26
5.3 Functions Of Risk Management……………………………………………………………………………………………… 30
5.4 Summary…………………………………………………………………………………………………………………………. 31
5.5 Questions………………………………………………………………………………………………………………………… 32
Lesson 6………………………………………………………………………………………………………………………………….. 33
6.The Loss Retention Decision And Calculation Of Cash Flow Costs ……………………………………………….. 33
6.0 Introduction…………………………………………………………………………………………………………………….. 33
6.1 Objectives………………………………………………………………………………………………………………………… 33
6.2 The Loss-Retention Decision ………………………………………………………………………………………………….. 33
6.3 Financial Analysis Of Loss Retention ……………………………………………………………………………………… 35
6.4 Calculation Of Cash Flow Cost:………………………………………………………………………………………………. 35
6.5 Summary…………………………………………………………………………………………………………………………. 36
6.6 Questions………………………………………………………………………………………………………………………… 37
Lesson 7………………………………………………………………………………………………………………………………….. 38
7. Commercial Insurance And The Administration Of Risk Management Program……………………………… 38
7.0 Introduction…………………………………………………………………………………………………………………….. 38
7.1 Objectives……………………………………………………………………………………………………………………….. 38
7.2 The Risk Manager And Commercial Insurance Management……………………………………………………… 38
7.3 Administering The Risk Management Program………………………………………………………………………… 40
7.4 Summary…………………………………………………………………………………………………………………………. 42
7.5 Questions………………………………………………………………………………………………………………………… 42
Lesson 8………………………………………………………………………………………………………………………………….. 44
8. Credibility , Utility And Deductibles………………………………………………………………………………………….. 44
8.0 Introduction……………………………………………………………………………………………………………………… 44
8.1 Objectives……………………………………………………………………………………………………………………….. 44
8.2 Formula For Calculating Premiums…………………………………………………………………………………………. 44
8.3 The Fundamental Principle Of Insurance …………………………………………………………………………………. 45
8.4 Utility Concept……………………………………………………………………………………………………………….. 46
8.5 Utility And Insurance Premiums…………………………………………………………………………………………….. 47
8.6 The Deductible Decision……………………………………………………………………………………………….. 47
8.7 Summary…………………………………………………………………………………………………………………………. 50
8.8 Questions………………………………………………………………………………………………………………………… 50
References………………………………………………………………………………………………………………………………. 52
BMS 202: Risk Management Notes
