TRIP Risk Management 3

Question 1

Which risk management concept describes the variability of actual losses around their expected value?

Accepted Answer

Volatility

Answer

Volatility measures how much actual losses deviate from expected losses, which is critical when deciding how much risk to retain versus transfer.

Question 2

A transportation risk manager uses a probability-impact matrix to prioritize risks. A risk rated 'high probability, high impact' should be addressed by:

Accepted Answer

Avoiding or aggressively mitigating the risk

Answer

Risks with high probability and high impact warrant immediate and significant action such as avoidance, elimination, or aggressive loss control measures.

Question 3

Which type of risk is inherent to all transportation businesses in a given market and cannot be eliminated through diversification?

Accepted Answer

Systematic risk

Answer

Systematic risk affects all companies in an industry or economy (e.g., fuel price spikes, regulatory changes) and cannot be diversified away.

Question 4

An annual aggregate retention of $500,000 in a transportation insurance program means:

Accepted Answer

The insured pays no more than $500,000 in total retained losses per policy year

Answer

An annual aggregate retention caps the insured's total out-of-pocket retained losses for all claims combined within a single policy year.

Question 5

In transportation risk management, 'moral hazard' refers to:

Accepted Answer

Behavioral changes that increase risk because an insured knows losses are covered

Answer

Moral hazard occurs when insurance coverage reduces an insured's incentive to prevent losses or behave carefully, because they know they are financially protected.

(TRIP) Transportation Risk and Insurance Professional Practice Test

(TRIP) Transportation Risk and Insurance Professional Practice Test

TRIP Risk Management 3