RMI 2101 FINAL EXAM 2026 QUESTIONS AND ANSWERS
RATED A+
✔✔What influencers size/ magnitude of risk charge ? - ✔✔The accuracy of the
estimation of P* & the level of confidence in the estimation of P*
✔✔Not a lot of past information - ✔✔Olympics , terrorism
✔✔Lots of past information - ✔✔Auto , home owners , life insurance
✔✔Step 3 of Risk Management Process - ✔✔Examine feasibility of risk management
techniques; risk control options
✔✔What are some Risk Control Options? - ✔✔Avoidance, loss control , loss prevention,
loss reduction, separation of exposure units , duplication of exposure units ,
✔✔Goals/objectives for Risk control - ✔✔Attempts to control risk, reduce frequency and
severity of loss or make losses more predictable
✔✔reactive avoidance - ✔✔stop engaging in the activity causing the loss
✔✔proactive avoidance - ✔✔Never engage in the activity causing the loss
✔✔Avoidance - ✔✔Technique that ceases or never undertaking an activity so that the
possibility of future loss occurring from that activity is eliminated ( just because you
avoid it doesn't mean it can't cause another loss
✔✔loss of control - ✔✔Attempts to reduce frequency of loss but doesn't completely
eliminate it ; impacts activities that take place before a loss occurs
✔✔Loss Reduction - ✔✔Attempts to Reduce severity
✔✔Pre-Loss Reduction Activities - ✔✔Sprinkler systems , fire doors , fire alarms , fire
drill etc .
✔✔Post-Loss Reduction Activities - ✔✔Speed of response , crisis management,
product recall , barriers to contain product
✔✔Desperation of exposure units - ✔✔Divide activities/ assets into smaller groups and
separate them , job cross training
✔✔Duplication of Exposure Units - ✔✔Key asset or activity is replicated or duplicated &
held in reserve , helps reduce severity of net income losses
, ✔✔ Risk - ✔✔is the uncertainty about future losses or outcomes
✔✔Probability - ✔✔likelihood that an outcome or event will occur
✔✔Pure Risk - ✔✔is a chance of loss or no loss but no chance for gain; always
undesirable
✔✔Good Example of Pure Risk? - ✔✔You own a building, it will either burn or not burn,
either way your financial responsibility remains constant. Pay the for the up keep of the
building or suffer financial loss if building burns.
✔✔Speculative Risk - ✔✔A chance of loss, no loss, or gain.; desirable
✔✔Good Example of Speculative Risk? - ✔✔Gambling, Stock; renting an apartment to
tenants and expecting profit from this investment
✔✔Static Risk - ✔✔always present for an organization; Doesn't Change overtime. i.e.
Natural Disasters, Employee injury, theft, fire
✔✔Dynamic Risk - ✔✔results from economic change and emerging risks; Cyber risk,
Terrorism, recessions, taxes and laws
✔✔Objective Risk - ✔✔The measureable variation in uncertain outcomes based on
facts and data.
✔✔Good example of Objective Risk? - ✔✔predicting the probability of car theft in
Philadelphia due to Statics or past information
✔✔Subjective Risk? - ✔✔Perceived amount of risk based on a individuals or
Organization's opinion; Hard to measure among different individuals. ( RISK APPETITE)
✔✔risk aversion - ✔✔differences in willingness to bear risk and someone's risk appetite.
✔✔Peril - ✔✔the immediate cause of loss (actually occurring)
✔✔Hazard - ✔✔A condition that increases the frequency or severity of a Peril.
✔✔Physical Hazard - ✔✔a condition of property, persons, or operations that tend to
increase the frequency or severity of a loss ( LOCATION/ Construction)
✔✔Moral Hazard - ✔✔A condition that increases the likelihood that a person will
intentionally cause or exaggerate a loss due to insurance
RATED A+
✔✔What influencers size/ magnitude of risk charge ? - ✔✔The accuracy of the
estimation of P* & the level of confidence in the estimation of P*
✔✔Not a lot of past information - ✔✔Olympics , terrorism
✔✔Lots of past information - ✔✔Auto , home owners , life insurance
✔✔Step 3 of Risk Management Process - ✔✔Examine feasibility of risk management
techniques; risk control options
✔✔What are some Risk Control Options? - ✔✔Avoidance, loss control , loss prevention,
loss reduction, separation of exposure units , duplication of exposure units ,
✔✔Goals/objectives for Risk control - ✔✔Attempts to control risk, reduce frequency and
severity of loss or make losses more predictable
✔✔reactive avoidance - ✔✔stop engaging in the activity causing the loss
✔✔proactive avoidance - ✔✔Never engage in the activity causing the loss
✔✔Avoidance - ✔✔Technique that ceases or never undertaking an activity so that the
possibility of future loss occurring from that activity is eliminated ( just because you
avoid it doesn't mean it can't cause another loss
✔✔loss of control - ✔✔Attempts to reduce frequency of loss but doesn't completely
eliminate it ; impacts activities that take place before a loss occurs
✔✔Loss Reduction - ✔✔Attempts to Reduce severity
✔✔Pre-Loss Reduction Activities - ✔✔Sprinkler systems , fire doors , fire alarms , fire
drill etc .
✔✔Post-Loss Reduction Activities - ✔✔Speed of response , crisis management,
product recall , barriers to contain product
✔✔Desperation of exposure units - ✔✔Divide activities/ assets into smaller groups and
separate them , job cross training
✔✔Duplication of Exposure Units - ✔✔Key asset or activity is replicated or duplicated &
held in reserve , helps reduce severity of net income losses
, ✔✔ Risk - ✔✔is the uncertainty about future losses or outcomes
✔✔Probability - ✔✔likelihood that an outcome or event will occur
✔✔Pure Risk - ✔✔is a chance of loss or no loss but no chance for gain; always
undesirable
✔✔Good Example of Pure Risk? - ✔✔You own a building, it will either burn or not burn,
either way your financial responsibility remains constant. Pay the for the up keep of the
building or suffer financial loss if building burns.
✔✔Speculative Risk - ✔✔A chance of loss, no loss, or gain.; desirable
✔✔Good Example of Speculative Risk? - ✔✔Gambling, Stock; renting an apartment to
tenants and expecting profit from this investment
✔✔Static Risk - ✔✔always present for an organization; Doesn't Change overtime. i.e.
Natural Disasters, Employee injury, theft, fire
✔✔Dynamic Risk - ✔✔results from economic change and emerging risks; Cyber risk,
Terrorism, recessions, taxes and laws
✔✔Objective Risk - ✔✔The measureable variation in uncertain outcomes based on
facts and data.
✔✔Good example of Objective Risk? - ✔✔predicting the probability of car theft in
Philadelphia due to Statics or past information
✔✔Subjective Risk? - ✔✔Perceived amount of risk based on a individuals or
Organization's opinion; Hard to measure among different individuals. ( RISK APPETITE)
✔✔risk aversion - ✔✔differences in willingness to bear risk and someone's risk appetite.
✔✔Peril - ✔✔the immediate cause of loss (actually occurring)
✔✔Hazard - ✔✔A condition that increases the frequency or severity of a Peril.
✔✔Physical Hazard - ✔✔a condition of property, persons, or operations that tend to
increase the frequency or severity of a loss ( LOCATION/ Construction)
✔✔Moral Hazard - ✔✔A condition that increases the likelihood that a person will
intentionally cause or exaggerate a loss due to insurance
