Evaluate the use of post-loss risk transfer mechanisms

Assignment Help Risk Management

Reference no: EM132217498

Purpose
To enable candidates to understand the role that risk financing and risk transfer play in risk management.

Assignment

You are a risk manager for ABC Group plc (ABC), a multinational company. ABC predominately has sales and service operations and has a small manufacturing base.

ABC has completed due diligence ahead of acquiring XYZ Group plc (XYZ). XYZ is of similar size to ABC and contains a number of manufacturing subsidiaries that will support future growth.

The due diligence identified a number of differences between the two insurance programmes. ABC's corporate insurance programme is based on a loss sensitive approach. ABC has a captive insurer, based in an off-shore location, to manage the significant retentions in its insurance programme for property and liability.

XYZ's insurances are placed on a conventional standard insurance basis. The XYZ programme contains the following key insurances:
• Property and liability programme with low deductibles.
• Employers' liability on a standard basis.
• Motor on a guaranteed cost basis.

You are required to deliver a report to the Board containing proposals of how to structure a new corporate combined insurance programme, to ensure the optimum sustainable total cost of risk.
• Explain, with justification, the risk profile of the combined business, resulting from ABC's acquisition of XYZ.
• Analyse three potential options, based on your explanation above, for the new corporate insurance programme.
• Recommend, based on your analysis, which option will deliver the optimum sustainable total cost of risk for the combined business.

learning outcomes

1. Evaluate the role that risk financing and risk transfer play in risk management.
2. Evaluate the use of unfunded risk financing mechanisms.
3. Evaluate the use of funded risk financing mechanisms.
4. Evaluate the use of conventional pre-loss risk transfer mechanisms.
5. Evaluate the use of non-conventional pre-loss risk transfer mechanisms.
6. Evaluate the use of post-loss risk transfer mechanisms

1. Evaluate the role that risk financing and risk transfer play in risk management
1.1 Evaluate the differences between risk financing and risk transfer within the risk management process.
1.2 Discuss the development of alternative risk transfer and the drivers for alternative risk transfer.
1.3 Discuss the role of the risk manager and other key staff in designing and implementing risk financing and risk transfer strategies.
1.4 Explain the range of risk financing and risk transfer mechanisms that are available.
1.5 Discuss the impact of risk appetite on risk financing and risk transfer strategies.

2. Evaluate the use of unfunded risk financing mechanisms
2.1 Discuss the use of cash flow and unallocated reserves to finance losses.
2.2 Discuss the use of deductibles and self-insurance programmes to finance retained risk.
2.3 Evaluate the advantages and disadvantages of unfunded risk finance.
2.4 Discuss the legal and fiscal implications of unfunded risk finance mechanisms.

3. Evaluate the use of funded risk financing mechanisms
3.1 Discuss the use of allocated reserves, captives, mutual funds and debt as mechanisms to fund losses.
3.2 Evaluate the advantages and disadvantages of allocated reserves, captives, mutual funds and debt as mechanisms to fund losses.
3.3 Discuss the legal and fiscal implications of funded risk finance mechanisms.

4. Evaluate the use of conventional pre loss risk transfer mechanisms
4.1 Discuss the role of conventional pre-loss risk transfer mechanisms.
4.2 Discuss the range of conventional pre-loss risk transfer mechanisms available.
4.3 Evaluate the advantages and disadvantages of conventional pre-loss risk transfer mechanisms.
4.4 Discuss the legal and fiscal implications of conventional pre-loss risk transfer mechanisms.

5. Evaluate the use of non-conventional pre-loss risk transfer mechanisms
5.1 Discuss the role of non-conventional pre-loss risk transfer mechanisms.
5.2 Discuss the range of non-conventional pre-loss risk transfer mechanisms.
5.3 Evaluate the advantages and disadvantages of non-conventional pre-loss risk transfer mechanisms.
5.4 Discuss the legal and fiscal implications of non conventional pre-loss risk transfer mechanisms including the systemic implication of the use of derivatives.

6. Evaluate the use of post-loss risk transfer mechanisms
6.1 Discuss the role of post-loss risk transfer mechanisms.
6.2 Discuss the use of equity placings and rights issues as risk transfer mechanisms.
6.3 Discuss the use of retro finite insurance and reinsurance as a risk transfer mechanism.
6.4 Evaluate the advantages and disadvantages of post-loss risk transfer mechanisms.

Attachment:- Specimen_2018.rar

Reference no: EM132217498

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