CRM CRM Insurance and Financial Risk 2

Question 1

What does 'loss frequency' refer to in insurance and risk management?

Accepted Answer

How often losses occur within a given period

Answer

Loss frequency measures how often loss events occur, which helps predict future losses and set appropriate premiums.

Question 2

Large deductible programs in risk financing primarily benefit organizations by:

Accepted Answer

Allowing cash flow advantages by retaining smaller losses internally

Answer

Large deductible programs allow organizations to retain and internally fund smaller losses while gaining premium savings and cash flow benefits.

Question 3

What is a 'captive insurance company'?

Accepted Answer

A company formed by an organization to insure its own risks

Answer

A captive is an insurance subsidiary created and owned by an organization to provide coverage for its parent company's risks.

Question 4

What is 'loss development' in actuarial terms?

Accepted Answer

The change in claim reserves as losses mature over time

Answer

Loss development refers to how incurred losses change as claims are investigated and settled over time.

Question 5

Which financial risk metric measures potential portfolio loss over a defined period at a given confidence interval?

Accepted Answer

Value at Risk (VaR)

Answer

Value at Risk (VaR) quantifies the maximum expected loss over a specific time period at a given confidence level such as 95% or 99%.

CRM - Certified Risk Manager Practice Test