Exam 3: Introduction to Risk Management

Which of the following is least likely to occur during a "hard" insurance market period?

Sources of information that can be used by a risk manager to identify pure loss exposures include all of the following EXCEPT

Abandoning an existing loss exposure is an example of

Loss frequency is defined as the

An insurance policy specifically written and designed to meet the needs of an insurance purchaser is called a(n)

In reviewing his company's operations,a risk manager noticed that all of the company's finished goods were stored in a single warehouse.The risk manager recommended that the finished goods be divided among three warehouses to prevent all of the finished goods from being destroyed by the same peril.Dividing the finished goods among three warehouses illustrates

All of the following are disadvantages of noninsurance transfers EXCEPT

All of the following statements about the administration of a risk management program are true EXCEPT

Which of the following statements about self-insurance is (are)true? I.It is a form of planned retention. II.State law usually prohibits its use for workers compensation.

Barb,who is self-employed,is the main breadwinner for her family.Barb does not have disability income insurance because she has never stopped to consider the impact of a long-term disability upon her family.Barb's treatment of the risk of disability is best described as

A restaurant owner leased a meeting room at the restaurant to a second party.The lease specified that the second party,not the restaurant owner,would be responsible for any liability arising out of the use of the meeting room,and that the restaurant owner would be "held harmless" for any damages.The restaurant owner's use of the hold-harmless agreement is an example of

Which of the following types of loss exposures are best handled by the use of avoidance?

Which of the following statements about captive insurance companies is (are)true? I.A captive insurance company established by a U.S.company must be domiciled in the United States. II.A captive insurance company may be owned by several parents.

Which of the following conditions is (are)appropriate for using retention? I.Losses are difficult to predict. II.The worst possible loss is not serious.

Laura Evans is risk manager of LMN Company.Laura decided to retain certain property losses.All of the following are methods which Laura can use to fund retained property losses EXCEPT

Mark owns a 1998 sedan.The last time Mark renewed his auto insurance,he decided to drop the physical damage insurance on this vehicle.How is Mark dealing with the auto physical damage exposure in his personal risk management program?

The worst loss that is likely to happen is referred to as the

Which of the following statements regarding the use of retention is (are)true? I.Retention is best used for loss exposures that have a low frequency and a high severity. II.A financially strong firm can have a higher retention level than a firm whose financial position is weak.

Acme Company has three identical manufacturing plants,one on the Texas Gulf Coast,one in southern Alabama,and one in Florida.Each plant is valued at $50 million.Acme's risk manager is concerned about the damage which could be caused by a single hurricane.The risk manager believes there is an extremely low probability that a single hurricane could destroy two or all three plants because they are located so far apart.What is the probable maximum loss associated with a single hurricane?

Loss severity is defined as the