The pure premium needed to cover the expected risks but with no allowance for expenses, commission and contingencies. It is the amount of premium required to cover the risk, taking account of the average claim amount and average claim frequency.
Insurance Encyclopedia
Risk premium method reinsurance
Also called yearly premium method it is a form of life reinsurance under which the risks, but not the reserves, are transferred to the reinsurer for a premium that varies each year with the amount at risk and the ages of the life insureds. The cedant retains all investment content.
Risk Prevention
Any measure designed to reduce the frequency of a given type of loss.
Risk profile
Analysis of (re)insurer’s business that tabulates risks into bands of similar values, showing the number of risks in each category, average values, aggregate values and aggregate premiums, etc.
Risk purchasing group (RPG)
US: A group formed in compliance with the Risk Retention Act of 1986 authorizing a group of insureds engaged in similar businesses or activities to purchase insurance coverage from a commercial insurer. This is in contrast to a risk retention group (RRG), which actually bears the group’s risks rather than obtaining coverage on behalf of group members.
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A group of similarly situated persons or entities that are permitted under federal law to organize across state lines to buy insurance. The carrier that sells insurance to the group must be licensed in at least one state but need not be licensed in every state where a member of the group resides.
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UK Alternative risk transfer term that refers to collective insurance buying.
Risk Purchasing Power
Decline in the purchasing power of money or any monetary asset because of inflation.
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 register
See: RISK INVENTORY.
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.