Risk Management Introduction Risk Definition Risk is the

Risk Management Introduction

Risk: Definition • Risk is the potential of loss (an undesirable outcome, however not necessarily so) resulting from a given action, activity and/or inaction, foreseen or unforeseen. The notion implies that a choice having an influence on the outcome sometimes exists (or existed). Potential losses themselves may also be called "risks" without any indication of cause. Any human endeavor carries some risk, but some are much riskier than others.

• Insurance is a risk treatment option which involves risk sharing. It can be considered as a form of contingent capital and is akin to purchasing an Option in which the buyer pays a small premium to be protected from a potential large loss. • Insurance Risk is often taken by insurance companies, who then bear a pool of risks including market risk, credit risk, operational risk, interest rate risk, mortality risk, longevity risks, etc.

The Primary Purpose of life Insurance • The primary purpose of life insurance is to protect families from loss of income caused by the death of a wage earner. • The beneficiary is the person who receives the benefits from a life insurance policy when the insured person dies. There can be more than one beneficiary of an insurance policy. • A key to the amount of life insurance a person needs is the amount of additional money the survivors will need to maintain their quality of life if the insured person dies.