An insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual arrangement is this?
reinsurance contract
the law of large numbers enables an insurer to
predict losses
which term describes the elimination of a hazard
risk avoidance
risk _________ is the process of analyzing exposures that create risk and designing programs to handle them
management
which of the following describes the act of insuring a risk against a possible loss?
risk transfer
a hold harmless clause is an example of risk
transfer
which one of these is not considered to be an element of an insurable risk?
speculative risk
purchasing insurance is an example of risk
transference
which of these statements regarding insurance is false?
as the number of insured units increases, the number of losses decreases
which of the following can be defined as a cause of a loss?
peril
ABC company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk
reduction
for insurance purposes, similar objects which are exposed to the same group of perils are referred to as
homogeneous exposure units
an insurance risk requires
that the chance of loss be calculable
what type of risk involves the potential for loss with no possibility for gain?
pure risk
what type of risk involves the potential for loss AND the possibility for gain?
speculative
a business becoming incorporated is an example of risk ______
transfer
how can an insurance company minimize exposure to loss?
reinsuring risks
which of the following is NOT an example of risk retention?
not doing a business deal after deciding it would be too risky
which of these statements is NOT a characteristic of the law of large numbers?
rates can be calculated to compensate for losses
which of the following can be defined as "the potential for loss"?
risk
according to the law of large numbers, how would losses be affected if the number of similar insured units increases?
predictability of losses will be improved