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risk financing seeks out funds to pay for fill in the blank
losses
use external funds called fill in the blank?
transfers
use internal funds called blank to pay for losses
rentention
borrowing money and issuing debt are examples of what?
retention (internal funds)
seek external sources from 3rd parties to finance losses, still have the asset or activity exposed to loss, transfer the financial responsibility for the loss not the asset/activity itself are all compenents of what?
Alternative risk financing mechansims
what is it called when you transfer the financial responsibility of the loss to the insurer?
insurance
where does non-insurance risk transfer to?
the fianancing type
what is an example of non-insurance risk transfers?
leases
is the tenant responsible for all property losses while occupying the property under the lease?
yes
who is responsible for the losses in the tenant fails to in this responsibility?
the owner
what is the term for a contract where one party agrees not to hold the other party responsible for certain risks or damanges?
a hold harmless agreement
what is called when an individual/firm engages in assuming the financial responsibility for losses that do occur?
retention
not buying insurance/insurance with a deductible are examples of what?
retaining the exposure to loss examples
a firm sets aside funds every period to pay for losses
funded
say a firm believes cost for the year is $1.2 million and they set aside $100,000 a month
funded retention (better for losses that are predictable and high in severity)
what is the term for paying for losses as they occur from money you have or money you borrow
unfunded retention
is unfunded retention better for losses that are low frequency and low in severity or high frequency and high severity?
low severity, low frequency
what type of retention is the deliberate decision to practice retention
active retention
what type of rentention is retaining the exposure to loss but you may be unaware (usually results from failure to identify)
passive retention
usually reserved for signifigant loss exposure where many exposure units exist (self insurance)
active funded rentention
what is the term for something that is not just comething that happens but rather well thought out strategy
formal program
A medical plan being fairly predictable is an example of ?
an ideal characteristic of self insurance
workers compensation, whic is a long payout period, is an example of what?
an ideal characteristic of self insurance
if mailing persciptions is illegal in states, it will not apply to you if you are self insured. what is this advantage of self insurance?
flexibility
which advantage of self insurance is saving from any loss prevention/reduction that goes directly into your pocket instead of through the insurance company?
time value of money
is self insurance cheaper for larger or smaller companies?
larger
could one large loss wipe you out when being self insured?
yes (disadvantage)
who has to perform administrative functions when dealing with self insurance?
the firm or they have to hire third parties, which cost money
who takes the blame for a PR scandal regarding self insurance?
the firm
certainty/peace of mond, serving other contracts, enhancing credit worthiness/protecting assets, and regulation/complience with the law are all reasons for what?
why people and firms purchase insurance
cost sharing and partial insurance is an example of what?
partial indemification
all losses are paid for no matter how large or small is called what?
full indemification
paying for some of your perscriptions with insurance is an example of what?
partial idemnification
What is the term associated in the event of a property loss, the insured should not collect more than the actual cash value of the loss (AVC)
Principle of Idemnity
AVC measures what?
measures a loss
what is the prupose of the AVC?
To control moral hazard/prevent the insured from making a porfit from the loss
does AVC have meaning regarding life insurance?
NO
Does AVC apply to insurance for rare items?
NO
what is the captive's primary purpose?
insuring the risks of the parent or parents of company
what are the two types of captives?
single parent captive and group captive
what is the main reason of having a captive
save money on premium
What type of captive is the one owned by Temple?
Group Captive
What is one distinct disadvantage the Temple captive would have vs a single parent captive owned by comcast?
income tax break of writing off premium paid to captive
what is the difference between funded and unfunded retention?
funded you save money to pay for future losses-unfunded you pay as you go
what are the two ideal characteristics for self-insurance?
losses are predictable and losses that have a long pay out window
