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Risk rating

Classification system used by the insurance industry to set premiums for health plans. Insured individuals who have a high risk pay more than others who are insured because of their health-related behaviors.

Risk reduction

Measures introduced into an insured organisation to mitigate the effects of risks that cannot realistically be avoided altogether. Measures vary according to the situation but the installation of burglar alarms, sprinkler leakage systems and implementation of quality control procedures are all examples.
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Any measure designed to reduce the size of those losses which are not prevented.

Risk Retention

A risk financing tool under which the source of funds is the firm itself or borrowings it must repay.Captive Insurer : In its pure form, an Insurer owned by apartment corporation which is also its only customer. One way of funding a retention programme.Captive Insurer, Association or Group : A captive Insurer owned by an association or group that insures only members of the association or group. A way of funding a retention programme.Planned Retention : Retention that results from a conscious decision. Active, not passive retention.Self-Insurance : A special case of planned retention-not Insurance. Exposures must be numerous enough for the loss exposure to be fairly predictable.Risk, Retention Groups : Liability insurance Companies owned by their Policyholders. Membership is limited to people in the same business or activity which exposes them to similar liability risks. The purpose is to assume and spread liability exposure to group members and to provide an alternative risk financial mechanism for liability. Such companies are usually precluded from writing certain coverage, most notably property lines and workers’ compensation. They predominantly write medical malpractice, general liability, professional liability, products liability and excess liability coverage. They can be formed as a mutual or stock company or a reciprocal.
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Characterized by paying losses with funds that originate within the organization ; or
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UK: The term used to describe the self-insurance assumed by an entity by means of deductibles on conventional insurances or by choosing not to insure at all.

Risk retention groups

Member-owned liability insurance companies. Set up in the US in the face of a ‘hard market’, a number of trade associations or groups of companies combined to form risk retention groups as allowed under the Liability Risk Retention Act 1986. The groups operate as insurance companies limited to writing liability covers for groups with a common interest. RRGS require members to capitalise the company. Many of the groups focus on pollution liability or product liability.
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A type of liability insurer owned by the policyholders. The members in this type of organization must be in the same type of business, so that they are exposed to the same type of liability risks. The organization spreads liability equally between the members and offers a different way of financing a liability.