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Principles of Risk Management and Insurance 13th Edition by George Rejda,Michael McNamara
Edition 13ISBN: 978-0134082578Principles of Risk Management and Insurance 13th Edition by George Rejda,Michael McNamara
Edition 13ISBN: 978-0134082578 Exercise 1
Explain the historical definition of risk.
b. What is a loss exposure?
c. How does objective risk differ from subjective risk?
b. What is a loss exposure?
c. How does objective risk differ from subjective risk?
Explanation
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a.The 'risk' has no single definition but it can be defined as the probability of happening of loss, damage, injury etc. It happens because the future is uncertain and nobody can control the future events. In other words, risk is dependent on the future which cannot be predicted.b.Loss exposure can be defined as the possibility of loss that is associated with the specific type of risk. It is a condition or situation in which loss is definite whether loss takes place or not. For example: damage done by earthquake etc.c.Difference between objective and subjective risk is explained below.
Objective risk is also known as degree of risk, it can be defined as variation in actual loss from expected loss. It increases or decreases due to decrease or increase in the number of exposure. It is inversely related with the number of exposure. While on the other hand subjective risk is based on the uncertainty of mental condition of a person.
Objective risk is also known as degree of risk, it can be defined as variation in actual loss from expected loss. It increases or decreases due to decrease or increase in the number of exposure. It is inversely related with the number of exposure. While on the other hand subjective risk is based on the uncertainty of mental condition of a person.
Principles of Risk Management and Insurance 13th Edition by George Rejda,Michael McNamara
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