CPCU Exam 1 Questions with
Answers 2025
Probability - -The likelihood that an outcome or event will occur
- Risk - -Uncertainty about outcomes, with the possibility that some
outcomes can be negative
- Pure Risk - -A chance of loss or no loss, but no chance of gain
- Speculative Risk - -A chance of loss, no loss, or gain
- Credit Risk - -The risk that customers or other creditors will fail to make
promised payments as they come due
- Subjective Risk - -The perceived amount of risk based on an individual's or
organization's opinions
- Diversifiable Risk - -A risk that affects only some individuals, businesses,
or small groups
- Systemic Risk - -The potential for a major disruption in the function of an
entire market or financial system
- Market Risk - -Uncertainty about an investment's future value because of
potential changes in the market for that type of investment
- Liquidity Risk - -The risk that an asset cannot be sold on short notice
without incurring a loss
- Risk Source (ISO 31000) - -Element which alone or in combination has the
intrinsic potential to give rise to risk
- Four Quadrants of Risk - -- Hazard Risk
- Operational Risk
- Financial Risk
- Strategic Risk
- Hazard Risk - -Arises from property, liability or personnel loss exposures
- Operational Risk - -Arises from people, processes, systems, or controls
- Financial Risk - -Arises from the effect of market forces on financial assets
or liabilities
, - Strategic Risk - -Arises from trends in the economy and society
- Residual Uncertainty - -Level of risk remaining after an individual or
organization implements their risk management plans
- Risk Management - -The process of making and implementing decisions
that will minimize the adverse effects of accidental losses on an organization
- Loss Exposure - -Any condition or situation that presents a possibility of
loss, whether or not an actual loss occurs
- 3 Elements of Loss Exposure - -- An asset exposed to loss
- Cause of loss (peril)
- Financial consequences of that loss
- Hazard - -A condition that increases the frequency or severity of a loss
- Moral Hazard - -A condition that increases the likelihood that a personal
intentionally cause or exaggerate a loss
- Morale Hazard - -A condition of carelessness or indifference that increases
the frequency or severity of loss
- Physical Hazard - -A tangible characteristic of property, persons, or
operations that tends to increase the frequency or severity of loss
- Legal Hazard - -A condition of the legal environment that increases loss
frequency or severity
- Property Loss Exposure - -A condition that presents the possibility that a
person or an organization will sustain a loss resulting from damage (including
destruction, taking, or loss of use) to property in which that person or
organization has a financial interest
- Tangible Property - -Property that has a physical form
- Real Property - -Tangible property consisting of land, all structures
permanently attached to the land, and whatever is growing on the land
- Personal Property - -All tangible or intangible property that is not real
property
- Intangible Property - -Property that has no physical form
Answers 2025
Probability - -The likelihood that an outcome or event will occur
- Risk - -Uncertainty about outcomes, with the possibility that some
outcomes can be negative
- Pure Risk - -A chance of loss or no loss, but no chance of gain
- Speculative Risk - -A chance of loss, no loss, or gain
- Credit Risk - -The risk that customers or other creditors will fail to make
promised payments as they come due
- Subjective Risk - -The perceived amount of risk based on an individual's or
organization's opinions
- Diversifiable Risk - -A risk that affects only some individuals, businesses,
or small groups
- Systemic Risk - -The potential for a major disruption in the function of an
entire market or financial system
- Market Risk - -Uncertainty about an investment's future value because of
potential changes in the market for that type of investment
- Liquidity Risk - -The risk that an asset cannot be sold on short notice
without incurring a loss
- Risk Source (ISO 31000) - -Element which alone or in combination has the
intrinsic potential to give rise to risk
- Four Quadrants of Risk - -- Hazard Risk
- Operational Risk
- Financial Risk
- Strategic Risk
- Hazard Risk - -Arises from property, liability or personnel loss exposures
- Operational Risk - -Arises from people, processes, systems, or controls
- Financial Risk - -Arises from the effect of market forces on financial assets
or liabilities
, - Strategic Risk - -Arises from trends in the economy and society
- Residual Uncertainty - -Level of risk remaining after an individual or
organization implements their risk management plans
- Risk Management - -The process of making and implementing decisions
that will minimize the adverse effects of accidental losses on an organization
- Loss Exposure - -Any condition or situation that presents a possibility of
loss, whether or not an actual loss occurs
- 3 Elements of Loss Exposure - -- An asset exposed to loss
- Cause of loss (peril)
- Financial consequences of that loss
- Hazard - -A condition that increases the frequency or severity of a loss
- Moral Hazard - -A condition that increases the likelihood that a personal
intentionally cause or exaggerate a loss
- Morale Hazard - -A condition of carelessness or indifference that increases
the frequency or severity of loss
- Physical Hazard - -A tangible characteristic of property, persons, or
operations that tends to increase the frequency or severity of loss
- Legal Hazard - -A condition of the legal environment that increases loss
frequency or severity
- Property Loss Exposure - -A condition that presents the possibility that a
person or an organization will sustain a loss resulting from damage (including
destruction, taking, or loss of use) to property in which that person or
organization has a financial interest
- Tangible Property - -Property that has a physical form
- Real Property - -Tangible property consisting of land, all structures
permanently attached to the land, and whatever is growing on the land
- Personal Property - -All tangible or intangible property that is not real
property
- Intangible Property - -Property that has no physical form
