Strategic Risk Financing
Definition of "Strategic risk financing"
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.
Popular Insurance Terms
Organization following the format of Lloyd's of London. ...
worth of each accumulation unit at the end of each valuation period for a variable annuity. This value is similar to that of the net asset value for a mutual fund. ...
Figure used in calculating a worker's primary insurance amount (PIA) to determine Social Security benefits in the following manner: calculate the number of years between the worker's ...
Report developed by or supplied by a credit agency to an insurer dealing with the financial standing and character of an insurance applicant. These factors are carefully weighted by the ...
Investment risk associated with the possibility that there is a rise in the interest rates after a fixed income security has been purchased resulting in a decline in that security's price. ...
Maximum limit of liability of an insurance company for a particular claim or kind of loss that is applicable in general to all such claims or losses. This maximum limit of liability is ...
clause found in health insurance contracts that requires the insured to pay a specified percentage of the covered health care expenses. ...
Minimum amount of coverage for which a company will write a liability insurance policy. ...
Same as term Floater: coverage for property which moves from location to location either on a scheduled or unscheduled basis. If the floater covers scheduled property, coverage is listed ...
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