Risk Management Essay Example | Topics and Well Written Essays - 1250 words

Risk Managework forcet - Essay Example14,040. b) Total corroborative (uninsured) lost time accident approachs = 36*650 = ? 23,400. c) The indirect (uninsured) cost of non lost time accidents =12*630 = ? 7,560. d) The total costs of speck accidents = 7,560 + ? 23,400 = ? 30,960. e) The cost of injury accidents per employee = 30.960/633 = ? 49. f) The total cost of damage accidents = 2500*85 = ? 212,500. g) The total accident costs for XYZ factory = 7560 + 212,500 + 23,400 =? 243,460. h) The average accident cost = 243,460/3 = ? 81,153. i) The average accident cost per employee = 243,460/633 =? 385. 2. Probability distribution of damage for an airplane Notes It can be observed from the diagram above that the probability of occurrence of damage increases up to a genuine maximum value and then falls drastically to zero. The probability of damage can be determined at different damage levels. The mean, median and the ninetieth percentile level of damage can be obtained. The 90th percen tile represents the highest possible damage pass judgment. 3. Principles of portfolio theory Positive correlation principle- this principle applies when the investment takes a positive move. For instance, in foreign exchange the upward or downward movement of two or more assets classes indicates a positive correlation. Investing in class of items that has high positive correlation helps in reduction of risk. ... To manage risk negative correlation implies that part of your investments may retain their value or improve while the rest deteriorates in value. The risk is manageable since one investment loses and the other gains. 4. Main elements of insurance premiums The amount of money paid in an insurance insurance policy (premium) depends on the following elements. 1) Intended use- the amount of premium paid will vary depending on the use of the commodity insured. For instance, a underground car and a public car require different premiums. 2) Mortality charges- Charges used to cov er the eventuality on an individual. Many companies, belief that young men cause a large number of accidents hence, they charge them high premiums. 3) Saving component- Some of the premium paid is used for reinvestment in order to generate returns which the policy holder receives in terms of bonuses or maturity amount. 4) Geographical location- People who live in densely populated areas that have high traffic slow-wittedness tend to pay higher premiums. In these areas, the incidences of losses are more pronounced. 5. Influences of the following factors on elements of premiums A. The insured expected losses When the level of loss expected is high, then the amount of premium to be paid is also high. Mortality charges will increase with the age of the insured since the expectation of death is high in old age. B. Potential variation around the insureds expected loss Changes in geographical location and age are associated with increased photograph to loss. These changes may imply an in crease in premium to the insured. C. Risk sharing arrangement between the insured and the insurer. Sharing of risks between the insured and the insurer implies allowance