PMT 0170 RISK MANAGEMENT EXAM 3 2026
REVISION WORKBOOK COMPREHENSIVE
NOTES A+
◉ Loss Exposure. Answer: any situation or circumstance in which a
loss is possible, regardless of whether a loss actually occurs
◉ Law of Large Numbers. Answer: as the number of exposure units
increase, the more closely the actual loss experience will approach
the expected loss experience
◉ Peril. Answer: the cause of the loss
◉ Hazard. Answer: a condition that creates or increases the
frequency or severity of a loss, or both
◉ Pure Risk. Answer: a situation in which there are only the
possibilities of loss or no loss
◉ Speculative Risk. Answer: a situation in which either profit, break
even, or loss is possible
, ◉ Diversifiable. Answer: a risk that affects only individuals or small
groups and not the entire economy
◉ Nondiversifiable. Answer: a risk that affects the entire economy or
large numbers of persons or groups within the economy
◉ Static. Answer: Risk that does not change significantly over time
◉ Dynamic. Answer: Risk that arises out of constantly changing
circumstances
◉ Subjective Risk. Answer: An individual view of uncertainty
regarding risk; not easily measurable
◉ Objective Risk. Answer: Based on data, experience, and other
means; measures the actual loss; more easily measurable
◉ Direct Loss. Answer: The cost to replace or repair financial or
physical assets
◉ Indirect Loss. Answer: Extra expenses that are the result of a loss
(i.e. Loss of Income)
◉ Frequency. Answer: How often losses occure
REVISION WORKBOOK COMPREHENSIVE
NOTES A+
◉ Loss Exposure. Answer: any situation or circumstance in which a
loss is possible, regardless of whether a loss actually occurs
◉ Law of Large Numbers. Answer: as the number of exposure units
increase, the more closely the actual loss experience will approach
the expected loss experience
◉ Peril. Answer: the cause of the loss
◉ Hazard. Answer: a condition that creates or increases the
frequency or severity of a loss, or both
◉ Pure Risk. Answer: a situation in which there are only the
possibilities of loss or no loss
◉ Speculative Risk. Answer: a situation in which either profit, break
even, or loss is possible
, ◉ Diversifiable. Answer: a risk that affects only individuals or small
groups and not the entire economy
◉ Nondiversifiable. Answer: a risk that affects the entire economy or
large numbers of persons or groups within the economy
◉ Static. Answer: Risk that does not change significantly over time
◉ Dynamic. Answer: Risk that arises out of constantly changing
circumstances
◉ Subjective Risk. Answer: An individual view of uncertainty
regarding risk; not easily measurable
◉ Objective Risk. Answer: Based on data, experience, and other
means; measures the actual loss; more easily measurable
◉ Direct Loss. Answer: The cost to replace or repair financial or
physical assets
◉ Indirect Loss. Answer: Extra expenses that are the result of a loss
(i.e. Loss of Income)
◉ Frequency. Answer: How often losses occure
