Exam 4: Advanced Topics in Risk Management

RST Company has production facilities in Salt Lake City and Cleveland.The probability that in any given year a fire will damage the production facility in Salt Lake City is 5 percent.The probability that in any given year a fire will damage the Cleveland production facility is 4 percent.What is the probability that AT LEAST ONE of the production facilities will be damaged by fire in any given year?

The transfer of insurable risk to the capital markets through the creation of a financial instrument is called

A computerized data base that permits risk managers to store and analyze risk management data is called a

A method of characterizing the relationship between two or more variables and then using the characterization to make a prediction is called

Uncertainty pertaining to the organization's goals and objectives and the organization's strengths,weaknesses,opportunities,and threats is called

The relative level of surplus in the insurance industry is called the industry's

Which of the following statements is (are)true with regard to probability analysis? I.If two events are independent,the occurrence of one event does not affect the occurrence of the second event. II.If two events are dependent,the occurrence of one event affects the occurrence of the second event.

Which statement is (are)true regarding property and liability insurance market conditions? I.Premiums are high when the insurance market is "hard." II.Underwriting standards are tight when the insurance market is "soft."

The property and liability insurance industry is characterized by a repetitive pattern of loose underwriting standards with low premiums followed by tight underwriting standards with high premiums.This repetitive pattern is called the

Hedge Fund Company offers a mutual fund to investors.Fund managers are concerned about fund volatility.They analyzed the fund to determine the worst loss likely to occur in a calendar quarter,assuming a 90 percent level of confidence.The worst probable loss is known as the fund's

A table showing losses that could occur and the corresponding chance that each loss could occur is called an

Two Below Zero is a new ski resort in Colorado.Two Below Zero is concerned that an abnormally warm winter will prevent the accumulation of snow needed to have a profitable ski season.Two Below Zero purchased a contract that will pay Two Below Zero a lump sum payment if the daily high temperature exceeds 30 degrees for more than 12 days between January 1st and March 31st.The contract Two Below Zero purchased is called a(n)

Which of the following statements is true regarding insurance market conditions and underwriting results?

Which of the following statements is true concerning the recent financial crisis and enterprise risk management?

Consolidation in the insurance industry is a continuing trend.One area where mergers and acquisitions frequently occur is between marketing intermediaries who represent insurance purchasers.These intermediaries are called

Which of the following was a consequence of passage of the Financial Modernization Act (Gramm-Leach-Bliley)?

Regional Airline (RA)spends millions of dollars each year on jet fuel.The company also has significant liability exposures.RA can retain a large portion of its liability exposure if fuel costs are low.The company can pay high fuel costs if retained liability losses are low.RA cannot,however,absorb both high fuel costs and high retained liability claims.RA's insurer designed an insurance program where the insurer pays only if both contingencies (high fuel costs and high retained liability claims)occur.The contract the insurer designed is called a(n)

A U.S.insurance company issued a guarantee against default to a German bank.The German bank invested in U.S.mortgaged-backed securities.The U.S.insurer promised that if the issuer of the mortgaged-backed securities defaulted,the insurer would pay the German bank for the loss.The guarantee the U.S.insurer provided is called a(n)

Reasons to adopt an enterprise risk management plan include all of the following EXCEPT

Which of the following is a financial derivative that derives value from specific insurable losses or from an index of values?