RMIN 4000 UGA EDMUNDS 2026 EXAMS TEST PAPER
QUESTIONS AND ANSWERS SURE A+
✔✔non-insurance transfer (risk financing technique) - ✔✔a method other than
insurance by which a pure risk and its potential financial consequences are transferred
to another party ex: contracts, leases, waivers
✔✔advantages of non-insurance transfer - ✔✔Can transfer some losses that are not
insurable
Less expensive
Can transfer loss to someone who is in a better position to control losses
✔✔disadvantages of non insurance transfer - ✔✔Contract language may be
ambiguous, so transfer may fail
If the other party fails to pay, firm is still responsible for the loss
Insurers may not give credit for transfers
✔✔Commercial Insurance - ✔✔appropriate for low-frequency, high-severity loss
exposures
✔✔areas of emphasis for commercial insurance - ✔✔1.selection of insurance
coverage's
2.selection of an insurer.
3.Negotiation of terms.
4.Dissemination of information concerning insurance coverages.
5.Periodic review of the insurance program
✔✔deductible - ✔✔a specified amount of money that the insured must pay before an
insurance company will pay a claim
✔✔Excess Insurance - ✔✔a plan in which the insurer does not participate in the loss
until the actual loss exceeds the amount a firm has decided to retain
✔✔manuscript policy - ✔✔a policy specially tailored for the firm
✔✔advantages of commercial insurance - ✔✔firm is indemnified for losses;can continue
to operate
•Uncertainty is reduced•
Firm may receive valuable risk management services
Premiums are income-tax deductible
✔✔disadvantages of commercial insurance - ✔✔premiums are costly
negotiation of contracts takes time and effort
risk manager may become lax in exercising loss control
, ✔✔low frequency, high severity - ✔✔Insurance and loss control
✔✔low frequency, low severity - ✔✔unfunded retention
✔✔high frequency, low severity - ✔✔funded reserve, loss prevention
✔✔high frequency, high severity - ✔✔avoidance
captive or risk retention group
loss prevention/reduction
✔✔Hard Market - ✔✔tight standards, high premiums, unfavorable insurance terms,
more retention, insurance is hard to obtain
✔✔soft market - ✔✔profitability is improving, standards are loosened, premiums
decline, and insurance become easier to obtain
✔✔step 4 implementing and monitoring chose techniques - ✔✔risk management policy
statement
periodic review and evaluation
compare costs and benefits
✔✔Benefits of Risk Management - ✔✔-Enables firm to attain its pre-loss and post-loss
objectives more easily
-A risk management program can reduce a firm's cost of risk
-Reduction in pure loss exposures allows a firm to enact an enterprise risk management
program to treat both pure and speculative loss exposures
-Society benefits because both direct and indirect losses are reduced
✔✔purpose of pooling losses - ✔✔reduce variation which reduces uncertainty (risk)
✔✔Risk Transfer - ✔✔A pure risk is transferred from the insured to the insurer, who
typically is in a stronger financial position
✔✔Indemnification - ✔✔The insured is restored to his or her approximate financial
position prior to the occurrence of the loss
✔✔Characteristics of an ideally insurable risk - ✔✔1. Large number of exposure units
2. Accidental and unintentional loss
3. Determinable and measurable loss
4. No catastrophic loss
5. Calculable chance of loss
6. Economically feasible premium
QUESTIONS AND ANSWERS SURE A+
✔✔non-insurance transfer (risk financing technique) - ✔✔a method other than
insurance by which a pure risk and its potential financial consequences are transferred
to another party ex: contracts, leases, waivers
✔✔advantages of non-insurance transfer - ✔✔Can transfer some losses that are not
insurable
Less expensive
Can transfer loss to someone who is in a better position to control losses
✔✔disadvantages of non insurance transfer - ✔✔Contract language may be
ambiguous, so transfer may fail
If the other party fails to pay, firm is still responsible for the loss
Insurers may not give credit for transfers
✔✔Commercial Insurance - ✔✔appropriate for low-frequency, high-severity loss
exposures
✔✔areas of emphasis for commercial insurance - ✔✔1.selection of insurance
coverage's
2.selection of an insurer.
3.Negotiation of terms.
4.Dissemination of information concerning insurance coverages.
5.Periodic review of the insurance program
✔✔deductible - ✔✔a specified amount of money that the insured must pay before an
insurance company will pay a claim
✔✔Excess Insurance - ✔✔a plan in which the insurer does not participate in the loss
until the actual loss exceeds the amount a firm has decided to retain
✔✔manuscript policy - ✔✔a policy specially tailored for the firm
✔✔advantages of commercial insurance - ✔✔firm is indemnified for losses;can continue
to operate
•Uncertainty is reduced•
Firm may receive valuable risk management services
Premiums are income-tax deductible
✔✔disadvantages of commercial insurance - ✔✔premiums are costly
negotiation of contracts takes time and effort
risk manager may become lax in exercising loss control
, ✔✔low frequency, high severity - ✔✔Insurance and loss control
✔✔low frequency, low severity - ✔✔unfunded retention
✔✔high frequency, low severity - ✔✔funded reserve, loss prevention
✔✔high frequency, high severity - ✔✔avoidance
captive or risk retention group
loss prevention/reduction
✔✔Hard Market - ✔✔tight standards, high premiums, unfavorable insurance terms,
more retention, insurance is hard to obtain
✔✔soft market - ✔✔profitability is improving, standards are loosened, premiums
decline, and insurance become easier to obtain
✔✔step 4 implementing and monitoring chose techniques - ✔✔risk management policy
statement
periodic review and evaluation
compare costs and benefits
✔✔Benefits of Risk Management - ✔✔-Enables firm to attain its pre-loss and post-loss
objectives more easily
-A risk management program can reduce a firm's cost of risk
-Reduction in pure loss exposures allows a firm to enact an enterprise risk management
program to treat both pure and speculative loss exposures
-Society benefits because both direct and indirect losses are reduced
✔✔purpose of pooling losses - ✔✔reduce variation which reduces uncertainty (risk)
✔✔Risk Transfer - ✔✔A pure risk is transferred from the insured to the insurer, who
typically is in a stronger financial position
✔✔Indemnification - ✔✔The insured is restored to his or her approximate financial
position prior to the occurrence of the loss
✔✔Characteristics of an ideally insurable risk - ✔✔1. Large number of exposure units
2. Accidental and unintentional loss
3. Determinable and measurable loss
4. No catastrophic loss
5. Calculable chance of loss
6. Economically feasible premium
