Chapter 5
Insurer Ownership, Financial, and Operational Structure
I.
Multiple Choice
1.
The difference between an insurers market value of assets and its market value of
liabilities is called:
a.
b.
c.
d.
economic capital
economic profit
reported capital

Final Exam
Chapter 11: Loss Control
Loss Control- Efforts that reduce expected losses
Loss Control Benefits- Lower expected losses
Prevention- Activities that reduce expected loses by reducing the frequency of
losses.
Loss Avoidance- Form of loss preventi

Chapter 8
Insurance Pricing
Ratemaking in Property and Casualty
Insurance
State Laws Require:
Rates should be adequate for paying all losses and
expenses
Rates should not be excessive, such that policyholders
are paying more than the actual value of th

Chapter 4
Pooling Arrangements and
Diversification of Risk
Pooling Arrangements
Basic Idea:
Replace your loss with the average loss of a group
Issues:
What happens to each persons
Expected loss
Standard deviation of loss
Maximum probable loss
How

Chapter 2
Objective of Risk Management
I.
1.
a.
b.
c.
d.
Multiple Choice
The fundamental objective of risk management is:
diversification
minimize the cost of risk
hedging
loss control
Answer: b
Type: K
2.
a.
b.
c.
d.
If unexpected increases in losses fro

Chapter 3
Risk Identification and Measurement
I.
1.
a.
b.
c.
d.
Multiple Choice
A listing of a random variables possible outcomes and the respective probabilities of
those outcomes is called the:
expected value
standard deviation
probability distribution

Chapter 4
Pooling Arrangements and the Diversification of Risk
I.
Multiple Choice
1.
Which of the following is not a type of contracting cost associated with the creation
and operation of pooling arrangements:
a.
b.
c.
d.
distribution costs
underwriting e

- Commodity price risk is the threat that a change in the price of a
production input will adversely impact a producer who uses that
input. Factors that can affect commodity prices include political
and regulatory changes, seasonal variations, weather, te