Portfolio Management & Strategy Flashcards

Under an 'occurrence-based' insurance policy included in a risk portfolio, coverage applies to:

Answer: Losses that occur during the policy period regardless of when the claim is filed

An occurrence policy covers losses that happen during the policy period, even if the claim is filed years after the policy has expired.

Which risk portfolio strategy concept refers to transferring peak-level losses while retaining moderate, expected losses within the organization?

Answer: Excess of loss (XL) structure

An excess of loss structure has the insurer cover losses above a defined retention (attachment point), while the organization retains routine expected losses below that threshold.

When a risk portfolio strategy incorporates a 'finite risk' insurance product, it is primarily designed to:

Answer: Spread and smooth timing risk of losses across multiple years while limiting insurer exposure

Finite risk products time-smooth and fund predictable losses across multiple years with limited insurer risk transfer, blending insurance with financial risk management.

A risk manager assessing 'counterparty risk' within the insurance portfolio is evaluating the possibility that:

Answer: An insurer or reinsurer may fail to pay claims due to insolvency or disputes

Counterparty risk in an insurance portfolio is the risk that an insurer or reinsurer will be unable or unwilling to fulfill its contractual obligations when claims are presented.

Which risk portfolio management practice involves periodically re-evaluating the mix of retained, transferred, and mitigated risks to reflect changes in the business environment?

Answer: Dynamic portfolio rebalancing

Dynamic portfolio rebalancing continuously reviews and adjusts the risk financing mix as business conditions, risk profiles, and market conditions change over time.

In enterprise risk portfolio strategy, 'emerging risks' are challenging to manage primarily because they:

Answer: Lack historical data, making likelihood and impact assessment highly uncertain

Emerging risks lack credible historical loss data, making them difficult to quantify, price, and strategically position within a risk portfolio.

A RIMS-certified risk manager presenting a risk portfolio strategy to the board should frame it in terms of:

Answer: How the risk financing decisions support and protect the organization's strategic objectives and financial health

Board-level risk portfolio presentations should connect risk financing decisions to organizational strategy, value protection, and financial resilience rather than technical insurance details.