FIN 341 LIEBENBERG EXAM 1 QUESTIONS &
ANSWERS
80% of schools experience _________ attacks - Answers -ransomware
What percent of the RMI industry will retire in the next 15 years? - Answers -50%
Top 5 most important global business risks for 2023 - Answers -1. Cyber incidents
2. Business interruptions
3. Macroeconomic development (inflation)
4. Energy crisis
5. Changes in legislation and regulation
Treasury Yield Curve - Answers -a plot of the yields on treasury notes and bonds
relative to maturity; predicts recessions
Define risk - Answers -uncertainty concerning the occurrence of a loss
Is it riskier to fall off of a treehouse or a 100-story tower? - Answers -Treehouse
become the outcome is uncertain; if you fall off the tower the outcome is certain: you die
How is risk used in the insurance industry? - Answers -to identify the property or life
that is being considered for insurance
Loss exposure - Answers -any situation or circumstance in which a loss is possible,
regardless of whether a loss occurs
Objective risk - Answers -the relative variation of actual loss from expected loss (fact)
Subjective (perceived) risk - Answers -uncertainty based on a person's mental
condition or state of mind (opinion)
T/F Subjective risk is measurable, data-drive, and non-biased - Answers -FALSE; this
describes objective risk, not subjective
Chance of loss - Answers -the probability that an event that causes a loss will occur
Objective risk/standard deviation - Answers -the relative variation of actual loss from
expected loss
Expected loss also means what? - Answers -mean or average loss
T/F Having higher objective risk means more variation from the mean - Answers -TRUE
, T/F Given two events with the same chance of loss, the one with the lower objective risk
is the riskier event - Answers -FALSE
Standard deviation formula - Answers -sqrt(sum of squares of the deviation from the
mean/n)
= sqrt(sum(xi-mean)^2/n)
Peril - Answers -cause of the loss (ex. fire, flood, theft)
Hazard - Answers -a condition that creates or increases the frequency or severity of
loss
4 types of hazards - Answers -physical, legal, moral, attitudinal (morale)
Physical hazard - Answers -a physical condition that increases the frequency or
severity of loss
Say fire is the peril; what are the hazards in these situations?
Gas station: 1
Desert: 2
California wildfires: 3 - Answers -1. gas, cars, people, etc.
2. nothing really in the desert, so the fire isn't as big of a deal
3. high temperature and dry weather
Two components of physical hazards - Answers -construction and location
Say an earthquake is the peril, how would the construction of a house (brick vs wood)
affect its resilience? - Answers -Brick would pose a physical hazard
How does the location of a house affect the flood (peril) loss? - Answers -the property
located in a flood zone is a physical hazard
Construction affects ____________
Location affects __________ & ___________ - Answers -severity
frequency; severity
Moral hazard (behavior) - Answers -dishonesty or character defects in an individual that
increase frequency or severity of loss; the change of behavior due to some condition
How is insurance fraud a moral hazard? - Answers -- the presence of insurance
changes the behavior
- for example, a wife kills her husband for life insurance
- charity hazard: residents in flood zones not buying insurance because they anticipate
receiving governmental & private aid
ANSWERS
80% of schools experience _________ attacks - Answers -ransomware
What percent of the RMI industry will retire in the next 15 years? - Answers -50%
Top 5 most important global business risks for 2023 - Answers -1. Cyber incidents
2. Business interruptions
3. Macroeconomic development (inflation)
4. Energy crisis
5. Changes in legislation and regulation
Treasury Yield Curve - Answers -a plot of the yields on treasury notes and bonds
relative to maturity; predicts recessions
Define risk - Answers -uncertainty concerning the occurrence of a loss
Is it riskier to fall off of a treehouse or a 100-story tower? - Answers -Treehouse
become the outcome is uncertain; if you fall off the tower the outcome is certain: you die
How is risk used in the insurance industry? - Answers -to identify the property or life
that is being considered for insurance
Loss exposure - Answers -any situation or circumstance in which a loss is possible,
regardless of whether a loss occurs
Objective risk - Answers -the relative variation of actual loss from expected loss (fact)
Subjective (perceived) risk - Answers -uncertainty based on a person's mental
condition or state of mind (opinion)
T/F Subjective risk is measurable, data-drive, and non-biased - Answers -FALSE; this
describes objective risk, not subjective
Chance of loss - Answers -the probability that an event that causes a loss will occur
Objective risk/standard deviation - Answers -the relative variation of actual loss from
expected loss
Expected loss also means what? - Answers -mean or average loss
T/F Having higher objective risk means more variation from the mean - Answers -TRUE
, T/F Given two events with the same chance of loss, the one with the lower objective risk
is the riskier event - Answers -FALSE
Standard deviation formula - Answers -sqrt(sum of squares of the deviation from the
mean/n)
= sqrt(sum(xi-mean)^2/n)
Peril - Answers -cause of the loss (ex. fire, flood, theft)
Hazard - Answers -a condition that creates or increases the frequency or severity of
loss
4 types of hazards - Answers -physical, legal, moral, attitudinal (morale)
Physical hazard - Answers -a physical condition that increases the frequency or
severity of loss
Say fire is the peril; what are the hazards in these situations?
Gas station: 1
Desert: 2
California wildfires: 3 - Answers -1. gas, cars, people, etc.
2. nothing really in the desert, so the fire isn't as big of a deal
3. high temperature and dry weather
Two components of physical hazards - Answers -construction and location
Say an earthquake is the peril, how would the construction of a house (brick vs wood)
affect its resilience? - Answers -Brick would pose a physical hazard
How does the location of a house affect the flood (peril) loss? - Answers -the property
located in a flood zone is a physical hazard
Construction affects ____________
Location affects __________ & ___________ - Answers -severity
frequency; severity
Moral hazard (behavior) - Answers -dishonesty or character defects in an individual that
increase frequency or severity of loss; the change of behavior due to some condition
How is insurance fraud a moral hazard? - Answers -- the presence of insurance
changes the behavior
- for example, a wife kills her husband for life insurance
- charity hazard: residents in flood zones not buying insurance because they anticipate
receiving governmental & private aid
