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The science of insurance and the notion of technical risk-10

Elsevier Ltd
DOI: 10.1016/b978-075065909-3.50012-8
  • Economics


Publisher Summary This chapter focuses on the science of insurance and the notion of technical risk. Insurance is the science of the unlikely. Risk coverage is usually given for improbable events. Understanding the frequency and severity of a potential claim is a prerequisite to sound insurance coverage. Better appreciation of risks invariably means inclusion of expected risks that have a pattern as well as unexpected risk and extreme events. This chapter focuses on insurance industry as a case study for operational risk identification, measurement, and control. The merging of financial instruments and insurance changes the perspective of technical risk at the frontline of the insurance industry. One of the policies insurers borrowed from bankers is securitization. They offer investors event risk oriented securitized instruments with their value linked to natural catastrophes.

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