Level 2 Notes

 Risk Management  Glossary

 Fidelity Bonds  Aviation
 Association  Statutory Conditions
 Commercial

Captive Agent - agent that places all business with one
insurance company
Risk Analysis – process of identifying & quantifying
exposures
Risk Management – counselling the client on managing risk
exposures
- Minimization of detrimental effects of risk by
identifying the risk, measuring the risk, &
controlling the risk
Provincial Plans Outside Canada
Only pay prescribed fees – not what is actually charged
Pre-existing conditions may NOT be covered
Must be accidental injury
Out of pocket expenses
Only for 6 months
Pregnancy over 8 weeks ofdue date is NOT covered
Pays necessary medical expenses
Trip Cancellation
Early flights home – accident, injury, or sickness
Repatriation Costs

Captive Insurer – setting up own insurance company Canadian under 65

- deal with their risks (Finance retained losses) Pre-existing conditions
- to be in better tax position <60 – 3 months
- self-insurance >60 – 6 months

Pure Captives – owned by insureds (insuring own risks) Brokerage/Agent

Sponsored Captives – owned by unrelated parties
- established to finance retained losses
- usually owned by its parent company
- purpose is to fund losses
- considered a financing technique rather than a
transfer technique
- one or few shareholders
- insures one client or very few
Minimum Expected Loss Method
➢ Costing each possible risk management technique &
applying the technique to possible losses which are
estimated
➢ Amount of claims relative to earned premiums
➢ Expected loss ratio of ultimate losses to earned
premiums
➢ Same as Loss Ratio
Travel Insurance
-has Return of Vehicle coverage
Producer – responsible for generating sales
Account Servicer – intermediary between primary client
contract person & the marketer
Marketer – crafting information in submissions to be only
submitted by producer
- analyze quotations received & prepared on
insurance proposal for presentation by
producer
Brokers Role in Claims
➢ Assisting in reporting claims
➢ Explain claims process
➢ Monitor progress of claims
➢ Advocate on the insured’s behalf
Risk Management
Categories:
1. Personal Risk – loss of health or life
2. Property Risk – financial loss to property damage
3. Liability Risk – negligent actions cause bodily injury
or property damage

Provincial Plans in Canada Dealing with Risk

Reciprocal between provinces 1. Avoidance – all chance of financial loss has been
No coverage eliminated
Ambulance 2. Controlling – reduce the frequency & severity of
Family visitation losses
Repatriation (sending home) 3. Retention – self-insuring (by company); insurance
Return of Vehicle policy deductible; limiting coverages
 4. Transfer – insurance policy purchase; most practical
& popular
▪ Theft – taking without consent
▪ Robbery – taking by use of force or threat of violence
▪ Burglary – forced entry; taking by forced entry to
property
Spread of Risk
❖ spreading the losses of the few among many
❖ basis of Credit System
❖ eliminates worry (encourages entrepreneurship)
❖ Loss prevention and loss reduction
❖ Sources of employment & investment capital
Insurance in Canada
Supervised and regulated by Federal & Provincial
Governments
Role of Federal Government
▪ Assessing the financial soundness of insurers
▪ licensing insurers in Canada
▪ OSFI (Office of the Superintendent of Financial
Institutions)
Role of Provincial Government
▪ Superintendent of Insurance
▪ Administering the Insurance Act
▪ Supervising terms & conditions of insurance contracts
▪ Licensing of insurers, agents, brokers, & adjusters
▪ Monitoring solvency provincial insurers
Four Insurance Council
1. Alberta Insurance Council – financial arm of councils
- provides investigation & administration
services to other councils
2. Insurance Adjusters Council
3. General Insurance Council
4. Life Insurance Council – regular bodies responsible for
licensing & discipline of insurance agents, brokers, &
adjusters
Associations and Organizations
Canadian Council of Insurance Regulators
- interjurisdictional association
- To serve public interest
Insurance Bureau of Canada (IBC)
1. Advocation on behalf of the insurance industry
2. Responds to legal developments
3. Overseeing regulatory improvements
4. National industry association
5. Represents Canada P&C insurers
6. Collects statistics
7. Actuarial analysis
8. Draft policy forms
9. Manage inter-company agreement on claim
settlement
10. Monitor legislation
11. Works with government in development of
insurance legislation
NO EDUCATION
NO GOVERNMENT INSURERS
Canadian Insurance Claims Manager Associations (CICMA)
- Claims managers
- Promote high standard of ethics in claims
- Administer Canadian inter-company Arbitration
Agreement
Insurance Institute of Canada (IIC)
- Education
- Membership association
- National examinations, grading, & awarding diploma
- Industry careers
Insurance Brokers of Canada (IBAC)
- Organized brokers
- Non-profit trade association
- Develops & maintains licensing courses
- Close liaison with government, consumer groups,
insurance company, and industry organization
Insurance Advisory Organization (ICPB)
- Education for risk managers
- Risk inspections
- Advisory rating services
- Loss control school for insurance & fire department
Property & Casualty Insurance Compensation Corp.
(PACICC)
- Bankruptcy of insurer & claims can NOT be paid
- Pays all VALID CLAIMS
- All participating companies pay the claims
- Maximum $250,000 for all claims – single occurrence
- Refund up to 70% of unearned premiums subject to
maximum $750/policy
Fire Underwriters Investigation (FUIB)
- Crimes relating to fire & other property losses
- Canadian automobile theft bureau
- Fire investigation bureau
Underwriters Laboratories of Canada (ULC)
- Testing center
- Construction materials & services to determine effects
on fire, accident, & property hazard
Glass breakage - accidental breakage of glass removed
under Tenant Packages
- Covered in Basic Policy (13 perils)
Broad Policy (all risk)
Comprehensive Policy (all risk)
Mobile Home – ACV on dwelling
- replacement on contents
Tenants Packages
Basic Form – no glass coverage – named perils
Comprehensive – improvements or betterments
- damage to building - $500 max
- theft or attempted theft
- vandalism or malicious acts
Condominium - shared ownership
1. Unit Improvements or Betterments
2. Loss Assessment
3. Additional Protection
-base fixtures if no coverage or insufficient
Seasonal Travelling
- seasonal basis
- named perils (only if named)
- additional premium:
1. Burglary or robbery
2. Vandalism or malicious acts
3. Glass breakage
- NO COVERAGE
1. Loss of property due to change of temperature
2. Freezer foods
3. Outdoor trees, plants, or shrubs
- Under Homeowners Basic Form
▪ Must be with same insurer
▪ Constructed as a year-round residence
▪ Occupied at least one day in 60-day period year
round
▪ Not rented to others
▪ Primary heating must be thermostatically
controlled furnace or electricity
▪ Accessible by maintained roadway year round
▪ NO COVERAGE: Theft
Watercraft
Outbound – not more than 16HP
Inbound – not more than 50HP
Non-motorized – not more than 26 feet
Business & Business Property
Any continuous or regular pursuit undertaken for financial
gain including a trade, profession, or occupation
Business Exceptions
- Provides coverage for injury or damage out of business
activities
- If not directly related to your trade, profession, or
occupation [ex. Golfing in company tournament]
- Occasional rental to others – dwelling
- 3 car spaces rental
- Temporary or part time business pursuits <21 y.o.
Commercial Liability [CGL]
Arising out of their use or ownership of premises, their
operations, products they make or sell & completed
operations for service
BI – Bodily Injury (injury, sickness, disease, & death)
PD – Property Damage (tangible property)
PP – Personal Property (unintentional negligence)
- False arrest, detention, or imprisonment
- Malicious prosecution
- Wrongful entry or eviction
- Slander & libel of person on their goods
Legally Obligated to Pay: Canada & US
Medical Payments – one year from date of accident
Liability Endorsements
1. Tenants Legal Liability
– premises occupied by the insured
2. Employers Liability
– employees NOT covered by WCB
Additional Liability Policies
1. Excess Liability – umbrellas
- When max on primary is exhausted
2. Environmental Impairment Liability
- Pollution liability & environmental clean up
- Specialty markets
3. Wrap-up Liability
- constructions projects
- coverage for all trades in project
- alleviates need for general contractor to obtain
insurance confirmation from all trades
- coverage for directors & officers (damage
caused to shareholder)
4. Contractual Liability
- Assumed under contract
- May have limitations
- Hold Harmless Agreements – common source
5. Professional Liability
– Professionals – special body of knowledge, skills,
or experience
 – E&O Insurance, Malpractice & Directors, & SEF No. 17 – Reinstatement of Coverage
Officers Insurance – For period not less than 60 days
– Limited number of insurers – Benefit still have third party liability & accident
– Very industry specific benefits coverage
– Claims-made basis
– Aggregate limit SEF No. 23 – Mortgage Endorsement
– Usually only cover non-bodily injury or non-
property damage losses SEF No. 32 – Recreational Vehicle

Commercial Insurance Soft Market – Insurance is inexpensive

Marine Insurance – vessel, hull, & cargo – Ready supply
Aviation Insurance – greatest risk: helicopters – Insurers lower premium
– Private & Commercial – Excess capacity
– Operations of aircraft, airstrips, & airfields – Broad terms
Aircraft Insurance – Lots of competition
Hull Coverage A = all risk [on the ground (motion or not) & – taking business from competitors
inflight] – Excess financial capacity
Hull Coverage B = ground & taxing
Hull Coverage C = ground risk only Underwriters Strategies
= on ground - not in motion 1. Lower premium rates
2. Relaxed policy terms & conditions
Determination of Premiums 3. Relaxed loss prevention & control measures
Construction – Will try to create new products with new demand
Operation
Protection Hard Market
Exposure – Insurance expensive
– Short supply
Glass Insurance – Insurers raise premiums
– endorsement – Low capacity – decline
– covers building glass, lettering & ornamental – Very tight terms
– all risk except fire, war, or nuclear – Low capacity – demand exceeds supply
– Additional Premium: Scratching & Defacement
Run-off – insurer ceases to write new business & only
Bailee Customers Floater – all risk service existing policies
– Bailees responsible unless proven not negligent
Market Dislocation – when insureds are forced to find new
Fidelity Bonds – three-part agreement insurer when current insurer withdraws from market
Surety – insurance company
Obligee – employer Typical Insurance Cycle – 7-year life span
Principal – employee – 4 years of falling rates followed by 3 years
increasingly weakening results
Bond is a promise NOT insurance Waiver – actions by one party might have the effect of
– Must be signed & sealed; involves 3 people giving up a known right
– Intentional relinquishment of a known right
SPF No. 7 – Standard Excess Auto Policy Representation – a statement believed but NOT
– Third Party Liability excess coverage guaranteed to be true
Warranty – a statement guaranteed to be true
SPF No. 8 – Standard Lessor’s Contingent Auto Policy
– Purchased by those involved in leasing autos on Non filed inland marine forms
long term basis - Covers domestic shipments
– Indemnity to lessor if Lessee does not carry - Annual transit policies
insurance - Trip transit policies
- Motor truck cargo policies
SEF No. 16 – Suspension of Coverage
Mail Coverage Form - Filed form
- part of 150 package policy program
Value Reporting Form - Fluctuating inventory
- Report values periodically
Retroactive date – date reported claims begin
Contributory Negligence Act
When by fault of 2 or more persons damage or loss is caused
to 1 or more of them.
The liability to make good damage or less is in proportional
to the degree in which in each person was at fault.
Can be different degrees of fault.
Level 2 Review Manual
2. CR < 100%
= insurers surplus increased
Underwriting Profit (or loss)
- arises out of insurance operations
- the amount earned premiums exceed (or fall short of)
the cost of incurred claims & expenses
Investment Income
- Income the insurer earns from investing money
- From many received as premiums, not yet earned as
well as money set aside to pay claims
Manuscript Policies
Unique wordings specially drafted to accommodate
the unique need of particular risk.

Premium from Insureds  Insurance  Claims Pay Loss Frequency & Severity
Frequency of Loss
Good Spread of Risk - Balance of premiums to losses & - How often losses likely to occur in the future
expenses -  higher loss frequency = worse loss experience
IBNR – incurred but not reported Severity of Loss
- Average size of losses
Ratio of net premiums to equity - Larger average loss = higher loss severity
Capital & surplus is measured 2.5:1 -  higher loss severity = worse loss experience

Maximum single exposure Estoppel

Max % of equity that can be put at risk on single exposure When someone by his actions, or lack of it, indicates that
he will not exercise a right he has.
Finance Company  insured Insurer agrees to pay – can NOT later deny to pay
pays unearned premiums used as collateral
Broker  insurer Waiver
Intentional & voluntary relinquishment of a known right
Role of Underwriters Clearly expressed & in writing
– accepting or rejecting risk
– investing of capital Insurer A (underwriting) $ retention
– implementing of an insurer’s strategic plan  } cedes (ceding)
Insurer B (reinsurer) $ cession
Loss Ratio - Claims/earned premiums  } cedes (ceding)
- Incurred claims to its earned premiums Insurer C (retrocessionaire) $ retrocession
- Specified period
Why Reinsure?
Expense Ratio – expenses/earned premiums a. To  insurer’s capacity to write business
- Insurer’s acquisition costs (commissions & b. Maintain proper reserve/liability balance
premiums) & other expenses (taxes) to its c. Reduce effects of catastrophic loss
earned premiums d. Provide stability in fluctuating market
- Specified period e. Enable insurer to cease operations

Combined Ratio - sum of insured’s loss & expense ratio Proportional & Non-proportionality
- Loss ratio + expense ratio = sum Methods of Reinsuring
Proportional – company shares losses in some proportion
Combined ratio exceeds 100% - Fixed % of risk transferred
1. CR > 100% than earned premium - Pays (reinsurer) % of losses (based on % of
Less expenses = insurers surplus reduced premium)
Non-proportional - reinsurer portion depends on size of
loss
- Varies
- Reinsurer pays over set amount
- No premium % considered
- Insurers pays set amount than reinsure takes over
ICLR Institute for Catastrophic Loss Reduction
- University of Western Ontario
- Insurance initiative to reduce the human & financial
cost of natural disaster
- Risk management practices & consumer loss
prevention measures
GAA Groupement des Assureurs Automobiles
- Shared facilities, staff & support services with
Insurance Bureau
- Quebec – mandatory all private in QC
PACICC Property & Casualty Insurance Compensation Corp
- 1988 formed – non-profit
- Reasonable level of recovery for policyholders &
claimants
- Maximum recovery $250,000 all claims from each
policy of insolvent insurer – one occurrence
CSIO Center for Study of Insurance Operations
- Non-profit joint venture between Insurance Brokers
Association & majority independent brokers
insurance company & system (computer) vendors
- Pooling of info to enhance broker & insurance
company operations
- Achieve profitability for brokers & companies
- Serves consumers
SAC The Surety Association of Canada
- Acts as voice of surety industry
- Negotiated better bonds & contract wordings
- Aimed at improving understanding of suretyship
process in Canada
ULC Underwriters Laboratories of Canada
- Not for profit
- Labs & certification services for examination
- Testing, certification of devices & construction
- ULC approved
IBC Insurance Bureau of Canada
- representing Canada’s private P&C insurers
- National Industry Association
- Advocating industry positions
- Identify & monitor issues
- Develop policy positions
- Respond to legal developments
- Staying on top of issues of strategic importance to
the industry
- Regulatory improvements – consumer outreach –
reforming the auto insurance system
- Adapting to climate change
- Insurance crime
- Membership voluntary
- IBC member companies can subscribe to:
Issues management
 Policy development  Public affairs
 Marketing  Legal
 Regional offices
Investigative Services
Crime  Auto-theft
Insurance info
IBAC Insurance Brokers Association of Canada
- National body – organized brokers
- Elevate the status of independent insurance
intermediaries  professional development
- Safeguards public interest
- Establishing improved standard of qualification & ethics
Provincial Brokers Association
- Establish ethical & provincial standards
- Representation from provincial associations make up
membership of IBAC
CIAA Canadian Independent Adjusters Association
- Provide leadership than advocacy & education
- Recognized professional standards
- Represents collective interests with training &
education
- Developed & maintained highest standards of
professionalism – defined code of ethics
CICMA Canadian Insurance Claims Managers Association
- Insurance company managers
- Promote high level standard of ethics in the handling of
claims
- Administer Canadian inter-company arbitration
agreement
Property & Casualty Insurance Industry
- Most highly regulated business at both federal &
provincial
Healthy Insurance Marketplace
Where consumers’ needs are met by product that are
readily available & affordably priced.
Where both insured & claimants are treated fairly
according to societal expectations.
 Risk-based Regulating Models Regulatory Activities – legislation & guidelines and
Key Objectives approving requests
1. Informed & empowered consumers Supervisory Activities – assessing safety & soundness of
2. Timely & fair claims management institutions
3. Meaningful choice for insurance consumers
4. Low system costs Risk-based Capital Standard
5. Market stability Used to rate the adequacy of an insured’s capital
1. Ratio of net premiums to equity (capital & surplus)
Risk-based regulation & supervision aim to neutralize the 2. Maximum single exposure (max % of equity can be
insurance premium-rate cycle. put at risk)

Price regulation delay market pricing tends to worsen the Minimum Capital Test
effect of premium-rate cycle on consumers.  Used by OSFI to measure solvency
 Requires insurers to have assets worth at least a
Risk-based system - regulators evaluate the actual goal of certain multiple of amount of liabilities & a margin of
consumers. Stable market place where consumers are additional assets.
treated fairly.
Overcapitalized – bad = will need to  premium volume
Provincial Insurance Regulators Undercapitalized – bad = will need to  premium volume
1. Monitoring insurer’s compliance with provincial
insurance legislation Canadian Council of Insurance Regulators
2. Monitoring solvency of insurers – Regulators from each province & territory & federal
3. Licensing of insurers level
4. Licensing & supervision of adjusters, brokers, & – Share info & find common solutions
agents – Promotes efficient & effective regulatory system to
5. Approving classes of business serve public interest
6. Controlling an insurer’s advertising
7. Reviewing contract wordings What causes hard market conditions?
8. Approving policy forms 1. Limited market competition
9. Enforcing underwriting eligibility criteria 2. Fierce competition
10. Overseeing: 3. Government regulation over rates
Claims settlement practices 4. High demand for a new product
Electronic marketing of insurance
Ethical, operational, & trade practices Reduced rates of profitability trigger hard markets
– capacity levels have been impaired
Alberta Provincial Regulation
- Regulates the insurance industry in Alberta Social Inflation – increase in claim costs resulting in
- Office of the Superintendent of Insurance generous jury awards
- The Four Insurance Councils Market Cycle Positions
1. Alberta Insurance Council Soft market Hard market
2. Insurance Adjusters Council I  loss profitability  regain profitability
3. General Insurance Council N  aggressively look for  face animosity of
4. Life Insurance Council S new business brokers & insuring
(Formed under Insurance Act under delegation from U  existing business public
minister of finance of province) R under attacked by
E competitors
OSFI: the Federal Regulator R
Primary regulator of federally chartered Canadian & foreign B  capacity is abundant &  Must labour to find
property & casualty insurance companies. R premium rates decline capacity for client
O (underwriters less needs
Mission: Protect interests of depositors, policyholders, K demanding)  Negotiate for
pension plan members & creditors of financial institutions E  less commission reasonable prices
from undue loss R income  Increase in commission
income
 Cyber Risk Coverage offered: Individually or part of business package
– Any risk of financial loss, disruption of business, or damage (no standard wording)
to organization’s reputation due to failure of IT systems.
– Threatens an organization’s ability to operate, its Perils that can be insured
profitability, & it’s reputation. 1. Theft of Data
2. Unintentional spread of virus
3 Categories 3. Loss of network to third parties
1. Deliberate & unauthorized breaches of security to access 4. Copyright and/or trademark infringement (libel,
IT systems for espionage, extortion, or embarrassment. slander, defamation)
(ransomware)
2. Unintentional – losing of memory stick or laptop Cyber Liability Coverage
3. Operational IT Risks – failing to install firewall or keep  Covers legal defense costs
software up to date.  Covers damages for lawsuits from certain perils
Optional Coverage
Direct Losses  Regulatory defense expenses
1. Costs to fix & restore systems, data, & software  Punitive damages
2. Ransom or extortion payments  Arbitration expenses
3. Funds directly lost due to fraud  Criminal awards
4. Costs to defend & settle lawsuits Specialized Coverage
 Directors & officers
Indirect Losses
1. Extra expenses – communications & public relation Exclusions
costs  Reputation damage
2. Accounting & other professional fees – determine  Lost intellectual property
extent of loss  Some class action lawsuits
3. Loss of Competitiveness – trade secrets stolen  Future losses – loss of competitiveness
4. Loss of Business – downtime
5. Loss of Reputation – trust Defamation – damaging a person’s character, as in slander
6. Loss of Opportunity – change course of plan (spoken) or libel (written)
Slander – oral utterance or spreading of falsehood harmful
Cyber Risk Exposures to another’s reputation
1. Behaviour Management - manipulating individual to Misrepresentation – incorrect or missing information about
open a door into a system a material fact, as in non-disclosure (failure to disclose) or
 Phishing, sending emails, embedding virus, concealment (deliberate hiding)
spyware, spear phishing, fake websites
Mitigating Behaviour Risks Errors & Omissions Insurance
▪ Training, awareness of cyber risks An error – doing something wrong
▪ Does it make sense? An omission – not doing something that should have been
▪ Does it follow an established process? done
▪ Was I expecting it?
Best Defense
2. Systems & Technology Management 1. Documentation
▪ Detecting weaknesses 2. Communication
▪ Denial of service attacks 3. Acting within the scope of your authority & competence
▪ Worms & viruses
▪ Malicious software Maintaining Client Fetes – no provincial regulations
Prescription Periods
Cyber Risk Insurance Policy Coverages - Limitation – claim brought forth
1. Third Party Liability - Vary province to province
2. Cyber Crime - Liability Policies – kept permanently
3. Extra Expense Cold Calling – obtain policy expiry date & insurance info
4. Business Interruption Losses Tracking Expiry Dates – to form a database of prospective
5. Crises Management Consulting Service customers
Upselling – selling upgrade version of existing policy - Insures client’s interest transport on own
(improving coverage) trucks
Cross selling -selling policies to cover other exposures - Coinsurance applies
- Offer assistance to client’s friends & family Aviation Insurance
1. Public Liability Insurance
Commercial 2. Ground Risk Hull Coverage
CBF Commercial Building Form 3. Taxing Insurance
CPF Commercial Property Floater 4. Inflight Coverage
CBES Commercial, Building, Equipment, & Stock Form 5. Other Optional Aircraft Insurance

Commercial Floaters – broader coverage territory Fidelity Bonds

(worldwide)
1. Office Contents – mainly office exposure Individual Blanket
- Theft damage to building
- Theft of money or stamps Primary Commercial Bond Blanket Position Bond
- Loss or damage to personal effects of insured or
others Primary Commercial Bond
- Extra expense - specific limit per loss for all employees
- Valuable papers & records - Discovery period of 1 year after policy expiry
- Sublimits apply Blanket Position Bond
- specific limit per employee
2. Electronic & Data Processing (EDP) – equipment - Discovery period of 2 years
- Broader coverage than Office Contents - Must show amount stolen per employee
- Hardware, firmware, software
3D Policy
3. Valuable Papers & Records – books, papers, files, maps, Crime & Fidelity Insurance in one form
drawings 5 Insuring Agreements
- All risk Agreement I. Employee Dishonesty
- Covers cost of researching & gathering the lost data Agreement II. Loss Inside Premises
Agreement III. Loss Outside Premises
4. Accounts Receivable – reconstruct account records Agreement IV. Money Order & Counterfeit Paper Currency
- Loss arising from inability to collect debts Agreement V. Depositor Forgery
Extensions
5. Transit - Transportation Floater Extortion – loss resulting from menus to either safety of
- Motor Truck Cargo Form person or property
- Trip Transit Floater Computer Fraud – inside only under I
- money & jewelry excluded
Other Exclusions: Errors & Omissions Insurance
o manning, scratching, & breakage - Claims-made basis
o Shifting of load - Annual aggregate limits
o Changes in temperature - Usually cover non-bodily injury & non-property damage

a. Transportation Cargo Form – all risk Property Insurance

- Shipped by truck, rail, air, or inland water
- Limited per load
b. Motor Truck Cargo Form - course of transit
 Truckman’s Form – legal liability cargo
- certain classes of carriers to certain limits of $
- In care, custody, or control of carriers
Does policy cover the damage?
Liability Insurance
Does policy cover the damage or injury?
Is the insured legally liable?
- covers bodily injury & property damage generally as a
result of insured’s negligence

 Owner’s Form – any business selling goods for Punitive & Exemplary Damages or Fines usually not
delivery covered here (libel or slander).
Liability Exclusions Financial Consequences
 Injury to employees - Reduced value of an asset
 Automobiles, watercraft, & aircraft - Decreased income derived from asset
 Care, custody, or control - Increased expenses to keep operating asset
 Products – damage to product not covered –
resulting is Methods of Exposure Identification
 Materials being worked upon 1. Surveys
 Pollution 2. Flow charts
3. Financial Statements
Limit: 1 million 4. Inspections

Environment Impairment Liability (EIL) Prouty measures frequency & severity

 Covers broad range of pollution exposures & gradual
pollution Low in severity & high in frequency
 Cover exposures not covered by CGL - Not too serious & fairly predictable
 Covers liability & sometimes clean-up cost

Risk Management
- minimization of detrimental effects of risk
1. Identifying the risk
2. Measuring the risk
3. Controlling the risk

Objectives
1. Pre-loss objectives – accomplished before loss occurs
2. Post-loss objectives – to be met after loss occurs

Pre-loss
1. Social Responsibility (improve public image)
2. Externally imposed obligations (gov’t, cust., etc.)
3. Peace of Mind (tolerance level for uncertainty)
4. Cost of Risk (operate economically)

Post-loss
1. Social responsibility (increase public image)
2. Survival (financially)
3. Operational Continuity (maintain operations)
4. Maintain Stable Earnings (maintain profits)
5. Sustain Growth (Rate of Growth)

Identifying & Measuring:

▪ Elements of Loss Exposure
▪ Methods of Exposure Identification
▪ Analysis of Loss exposure & Measuring the Risk

Elements of Loss Exposure

 Item subject to loss
 Potential cause of loss
 Financial consequence

Potential Causes of Loss

1. Human
2. Natural
3. Economic