Strategic Risk Financing

Definition of "Strategic risk financing"

Sharon Dolezal real estate agent

Written by

Sharon Dolezalelite badge icon

Coldwell Banker

Elimination of unnecessary financing costs and the redirection of those sums to activities that are more profitable. The concept is for the company to have a long-term view of its risk exposure as opposed to concentrating on the availability of insurance at any time. For example, in a soft market, companies tend to buy more insurance than they need because premiums are low. In a hard market, companies tend to retain their insurance coverage regardless of price. The methodology involves a cost/benefit analysis of the numerous risk retention options to discern the difference in the cost of a retention option and that of full/partial insurance for that option. In the analysis of each option, the company's past loss experience is examined and maximum possible loss scenarios in the future are projected. After the statistical studies are completed, a program is designed to provide an effective plan of risk coverage at an efficient price.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Insurance Terms

Landmark legislation passed by Congress providing the first regulation of the securities markets. The law, enforced by the securities and exchange commission (sec), requires registration of ...

Tax assessed by the states as a payroll tax on employers to pay for unemployment compensation ...

Method of classifying risks to establish equitable rates. In many property and liability insurance lines, the location of an insured has a significant impact on the loss experience. For ...

Injury that continues after a wound from physical or psychic entry. (The latter is a wound that makes a lasting impression on the mind, especially upon the subconscious mind; for example, a ...

Coverage for property damage by a covered peril to insured cotton during the time period from its weighing in at the gin until its delivery to the buyer. Written either on a specified peril ...

Ownership of property by two or more persons who do not have rights of survivor ship. The share of a deceased tenant passes to that person's heirs and not to the other tenants. Because ...

Term that describes commercial insurance with no administrative services attached, or alternatively, administrative services from an insurer without insurance coverage. Years ago, insureds ...

Termination of a plan. Under federal tax law, a plan can only be terminated for reasons of business necessity. Otherwise, prior employer tax deductible contributions under the plan are ...

Single insurance policy for only one kind of property at only one location of an insured. For example, property insurance on a rare piano in the insured's home would cover only that piano, ...

Popular Insurance Questions