Question 1

Why does a risk manager typically focus on the upper tail of the probability distribution?

Accepted Answer

A)  The upper tail shows the amount of coverage of the risk a firm faces. 
B)  The upper tail shows the total risk pool. 
C)  The upper tail shows the confidence interval of the loss distribution. 
D)  The upper tail shows the sum of the estimated mean loss plus the risk charge. 
A)  The upper tail shows the amount of coverage of the risk a firm faces. 
B)  The upper tail shows the total risk pool. 
C)  The upper tail shows the confidence interval of the loss distribution. 
D)  The upper tail shows the sum of the estimated mean loss plus the risk charge.

Question 2

The third step in risk management is:

Accepted Answer

A)  creating large enough pools to diversity risk 
B)  the process of the assessment of risk 
C)  the process of identifying risk tools 
D)  the process of identifying possible risks that can occur 
A)  creating large enough pools to diversity risk 
B)  the process of the assessment of risk 
C)  the process of identifying risk tools 
D)  the process of identifying possible risks that can occur

Question 3

Given the requisites of risk pooling, which of the following exposures would make the best subject of a profitable insurance pool? Assume a premium appropriate to the exposure is charged and analyze the exposure from the insurer's standpoint.

Accepted Answer

A)  Insuring all the lives of college seniors in the U.S. for $10,000 each, without an initial medical exam 
B)  Insuring college students against their GPA falling below a 3.0 
C)  Insuring all the dorms on a single college campus against property damage 
D)  Insuring students against the theft or disappearance of textbooks 
A)  Insuring all the lives of college seniors in the U.S. for $10,000 each, without an initial medical exam 
B)  Insuring college students against their GPA falling below a 3.0 
C)  Insuring all the dorms on a single college campus against property damage 
D)  Insuring students against the theft or disappearance of textbooks

Question 4

Which of the following statements about the average loss severity and average loss frequency is not correct?

Accepted Answer

A)  The average loss severity represents the average size of losses that might occur. 
B)  The average loss frequency represents the average number of losses that might occur. 
C)  Both the average loss severity and the average loss frequency are outside the control of the risk manager. 
D)  The average loss can be estimated by multiplying the average loss severity with the average loss frequency. 
A)  The average loss severity represents the average size of losses that might occur. 
B)  The average loss frequency represents the average number of losses that might occur. 
C)  Both the average loss severity and the average loss frequency are outside the control of the risk manager. 
D)  The average loss can be estimated by multiplying the average loss severity with the average loss frequency.

Question 5

Calculate the Expected Value of the following Probability Distribution:

Accepted Answer

A)  -38.2 
B)  -43.8 
C)  -44.3 
D)  -49.6 
A)  -38.2 
B)  -43.8 
C)  -44.3 
D)  -49.6

Question 6

The confidence interval increases with a larger pool size.

Accepted Answer

A) True 
 B)False

Why does a risk manager typically focus on the upper tail of the probability distribution?

The third step in risk management is:

Given the requisites of risk pooling, which of the following exposures would make the best subject of a profitable insurance pool? Assume a premium appropriate to the exposure is charged and analyze the exposure from the insurer's standpoint.

Which of the following statements about the average loss severity and average loss frequency is not correct?

Calculate the Expected Value of the following Probability Distribution:

The confidence interval increases with a larger pool size.

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Markets: Economics and Issues

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Annuities

Health Insurance and Disability Income

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

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Exam 3: Risk Assessment and Pooling

Why does a risk manager typically focus on the upper tail of the probability distribution?

The third step in risk management is:

Given the requisites of risk pooling, which of the following exposures would make the best subject of a profitable insurance pool? Assume a premium appropriate to the exposure is charged and analyze the exposure from the insurer's standpoint.

Which of the following statements about the average loss severity and average loss frequency is not correct?

Calculate the Expected Value of the following Probability Distribution:

The confidence interval increases with a larger pool size.

Introduction to Enterprise Risk Management and Insurance

Risk Identification

Risk-Handling Techniques: Loss Control, Risk Transfer, and Loss Financing

Risk-Handling Techniques: Diversification and Hedging

Fundamentals of Insurance

Insurable Perils and Insuring Organizations

Insurance Functions

Insurance Markets: Economics and Issues

Insurance Regulation

Insurance Contracts

The Personal Auto Policy

Homeowners Insurance

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions and Options

Annuities

Health Insurance and Disability Income

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

Commercial Property Insurance

Commercial Liability Insurance

Filters