Risk Financing Techniques

Risk Financing Techniques - Chapter Objectives Determine in...

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1 Chapter Objectives Determine, in which situations, risk retention is a preferable solution to risk transfer. List & explain seven types of funded risk retention Explain the essential elements of self insurance and describe the financial as well as nonfinancial factors that affect a firm’s ability to engage in funded risk retention Reinsurance primer
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2 Risk Retention Involves the assumption of risk If a loss occurs, an individual or firm will pay for it out of whatever funds are available at the time
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3 Retention vs. Transfer Risk Financing – Michael W. Elliott, 2000
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4 Planned Versus Unplanned Retention (Review from C5) Planned retention Unplanned retention
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5 Funded Versus Unfunded Retention (Review from C5) Unfunded (Informal) Retention Funded retention
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6 Types of Funded Retentions (1) Credit (2) Reserve funds (3) Captive insurers (4) Pools (5) Large Deductible Plans (6) Retrospective Rated Plans (7) Self-insurance
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7 (3) Captive Insurers (Risk Financing , Elliott) Definition: Types: Advantages:
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8 Potential Problems of Captives Disadvantages
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9 (4) Pools Risk Financing , Elliot (2000)
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10 (4) Pools Advantages: Disadvatanges
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11 (5) Large Deductibles
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