Term
| What are the methods for information that enable an organization to take a systemic approach to identifying loss exposure? |
|
Definition
| Document Analysis; Compliance Review; Inspections; Expertise Within and Beyond the Organization. |
|
|
Term
|
Definition
| The financial statement that reports the assets, liabilities and owners' equity of an organization as of a specific date. |
|
|
Term
| What is an Income Statement? |
|
Definition
| The financial statement that reports an organization's profit or loss for a specific period by comparing the revenues generated with the expenses incurred to produce those revenues. |
|
|
Term
| What is a Statement of Cash Flows? |
|
Definition
| The financial statement that summarizes the cash effects of an organization's operating, investing, and financing activities during a specific period. |
|
|
Term
| What is a Hold-Harmless Agreement (Indemnity Agreement)? |
|
Definition
| A contractual provision that obligates one of the parties to assume the legal liability of another party. |
|
|
Term
|
Definition
| The process of restoring an individual or organization to a pre-loss financial condition. |
|
|
Term
|
Definition
| A method of analysis that identifies conditions that increase the frequency or severity of loss. |
|
|
Term
| What is Theoretical Probability? |
|
Definition
| Probability that is based on theoretical principles rather than on actual experience. |
|
|
Term
| What is Empirical Probability (a posteriori probability)? |
|
Definition
| A probability measure that is based on actual experience through historical data or from the observation of facts. |
|
|
Term
| What is a Probability Analysis? |
|
Definition
| A technique for forecasting events, such as accidental or business losses, on the assumption that they are governed by an unchanging probability distribution. |
|
|
Term
| What is Law of Large Numbers? |
|
Definition
| A mathematical principle stating that as the number of similar but independent exposure units increases, the relative accuracy of predictions about future outcome (losses) also increases. |
|
|
Term
| What is a Probability Distribution? |
|
Definition
| A presentation (table, chart, or graph) of probability estimates of a particular set of circumstances and of the probability of each possible outcome. |
|
|
Term
| What is Central Tendency? |
|
Definition
| The single outcome that is the most representative of all possible outcomes included within a probability distribution. |
|
|
Term
|
Definition
| The weighted average of all of the possible outcomes of a probability distribution. |
|
|
Term
|
Definition
| The sum of the values in a data set divided by the number of values. |
|
|
Term
|
Definition
| The value at the midpoint of a sequential data set with an odd number of values, or the mean of two middle values of a sequential data set with an even number of values. |
|
|
Term
|
Definition
| The most frequently occurring value in a distribution. |
|
|
Term
|
Definition
| The variation among values in a distribution. |
|
|
Term
| What is Standard Deviation? |
|
Definition
| The average of the differences (deviations) between the values in a distribution and the expected value (or mean) of that distribution. |
|
|
Term
| What is Coefficient of Variation? |
|
Definition
| A measure of dispersion calculated by dividing a distribution's standard deviation by its mean. |
|
|
Term
| What is Normal Distribution? |
|
Definition
| A probability distribution that, when graphed, generates a bell-shaped curve. |
|
|
Term
| The Analysis step of the Risk Management Process involves considering the which four dimensions of a loss exposure? |
|
Definition
| Loss Frequency; Loss Severity; Total Dollar Losses; Timing. |
|
|
Term
| What is Data Credibility? |
|
Definition
| The level of confidence that available data are accurate indicators of future losses. |
|
|
Term
|
Definition
| The number of losses that occur during a specific period. |
|
|
Term
| What is Relative Loss Frequency? |
|
Definition
| The number of losses that occur within a given period relative to the number of exposure units (such as the number of buildings or cars exposed to loss). |
|
|
Term
| What are Frequency Distributions? |
|
Definition
| They are usually discrete probability distributions based on past data regarding how often similar events have happened. |
|
|
Term
| What is the purpose of analyzing Loss Severity? |
|
Definition
| The purpose of analyzing loss severity is to determine how serious a loss might be and how long it might take for an organization to resume operations after a loss. |
|
|
Term
| What is Maximum Possible Loss? |
|
Definition
| The total value exposed to loss at any one location or from any one event. One value = one building. Multiple values = fleet of cars. |
|
|
Term
| What is the Prouty Approach? |
|
Definition
| A method of jointly considering both loss frequency and loss severity. |
|
|
Term
| What are the four categories of Loss Frequency used in the Prouty Approach? |
|
Definition
| Almost Nil (Extremely unlikely to happen); Slight (Could happen but has not happened); Moderate (Happens occasionally); Definite (happens regularaly). |
|
|
Term
| What are the three categories of Loss Severity used in the Prouty Approach? |
|
Definition
| Slight (Organzation can readily retain each loss exposure); Significant (Organization cannot retain the loss exposure, some part of which must be financed); Severe (Organization must finance virtually all of the loss exposure or endanger its survival). |
|
|
Term
| What are Total Dollar Losses? |
|
Definition
| It is the third dimension to consider in analyzing loss exposures. It is calculated by multiplying loss frequency by loss severity. A simplified version of combining frequency with severity distributions and can be used when analyzing frequency and severity distributations that have multiple possible outcomes. |
|
|
Term
|
Definition
| The fourth dimension to consider in analyzing loss exposures is timing of loss. Risk Assessment requires considering not only when losses are likely to occur, but also when payment for those losses will likely be made. |
|
|
