Risk Treatment and Mitigation Flashcards
7 cards from real ARM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Treatment and Mitigation flashcards as text
Under a large deductible plan, who typically pays claims within the deductible first, and how is the deductible handled?
Answer: The insurer pays claims and then seeks reimbursement from the insured for amounts within the deductible
In large deductible plans the insurer usually handles and pays claims, then bills the insured for losses within the deductible.
A pure (single-parent) captive insurer is best described as:
Answer: An insurer owned by one parent organization that mainly insures that parent's loss exposures
A pure captive is a subsidiary formed to insure the loss exposures of its parent and affiliates.
In a retrospective rating plan, the final premium is:
Answer: Adjusted after the policy period based on the insured's actual losses, subject to minimum and maximum limits
Retro plans set the final premium from the insured's own losses during the period, within a minimum and a maximum.
Which feature most distinguishes finite risk insurance from traditional insurance?
Answer: It transfers a limited amount of risk, and premiums are a large share of the coverage limit
Finite risk plans transfer limited risk, and the insured often shares in favorable results because premiums nearly fund the limits.
An organization sets aside a dedicated reserve fund to pay for retained losses. This is an example of:
Answer: Funded retention
Funded retention means money is set aside in advance to pay retained losses.
Risk retention groups formed under the federal Liability Risk Retention Act are allowed to provide which type of coverage?
Answer: Liability coverage for members
Federal law limits risk retention groups to liability coverage for members with similar exposures.
A mid-sized firm wants captive-like benefits without forming its own captive, so it pays to use a captive owned by another party whose accounts are kept separate. Which arrangement fits best?
Answer: Rent-a-captive or protected cell company
Rent-a-captives and protected cell companies let organizations use captive facilities with segregated accounts without owning a captive.