RIMS Client Advisory & Consultation 4

Question 1

A client's risk advisor recommends increasing their self-insured retention (SIR). Which financial condition BEST supports this recommendation?

Accepted Answer

The client has strong cash flow, low debt, and the ability to fund moderate retained losses

Answer

A higher SIR is appropriate when the client has the financial capacity (strong cash flow, low leverage) to absorb retained losses, thereby reducing premium costs on the insured layer.

Question 2

During a client advisory session on cyber risk, which exposure is MOST commonly underestimated by organizations that focus only on first-party cyber losses?

Accepted Answer

Third-party liability arising from a data breach affecting customers or vendors

Answer

Organizations often focus on their own (first-party) recovery costs but underestimate the significant third-party liability exposure from lawsuits brought by customers or business partners affected by a data breach.

Question 3

A risk advisor helps a client negotiate manuscript policy language. What is the PRIMARY advantage of manuscript coverage over standard form policies?

Accepted Answer

Manuscript language can be customized to address the client's unique exposures not covered by standard forms

Answer

Manuscript policies are custom-drafted to address specific exposures, operations, or contractual requirements that standard ISO or AAIS forms do not adequately cover.

Question 4

A client is reviewing vendor contracts and asks their risk advisor about the implications of an indemnification clause. What is the risk advisor's MOST important advisory point?

Accepted Answer

The scope of the indemnification obligation must be matched to adequate contractual liability insurance coverage

Answer

When a client accepts broad indemnification obligations, the risk advisor must ensure corresponding insurance coverage (e.g., contractual liability under CGL) is in place to fund those potential obligations.

Question 5

Which risk financing technique involves the client pre-funding expected losses in a dedicated account while retaining the risk rather than transferring it to an insurer?

Accepted Answer

Funded reserve / funded retention program

Answer

A funded retention program involves setting aside capital in a dedicated reserve or trust to pay for anticipated losses, making retention financially organized and disciplined rather than ad hoc.

(RIMS) Risk and Insurance Management Society Certification Practice Test

(RIMS) Risk and Insurance Management Society Certification Practice Test

RIMS Client Advisory & Consultation 4