Risk strategy refers to a risk management technique whereby the risk of loss is transferred to another party via means such as a contract for instance a hold harmless contract or clause or otherwise to someone such as a professional risk bearer.
Within insurance and insurance management itself, there are different risks that you will come across.
Here we shall deal with some of those risk management strategies within the insurance business itself.
Some of the main risk management strategies that commonly pop up would be ones such as:
- Risk control
- Risk transfer
- Loss reduction
- Congregation of exposures; the spread of risks
The focus of insurance companies and of the customers themselves should however be risk transfer.
Within risk transfer as well, however there are kinds of risk transfer.
The first would be the Contractual Risk transfer:
This is a kind of risk transfer which allows you to be able to write out real insurance clauses for construction clauses, leases, purchase orders as well as contractual agreements.
Contractual risk transfer also provides highly detailed discussions and advice concerning or using additional insured endorsements, waivers of subrogation, contractual liability coverage, owners and contractors’ protective liability insurance and other kinds of insurance to cover risks which have been contractually assumed.
Other kins of risk transfer would also be Alternative Risk Transfer (ART) which is a field that grew out of insurance capacity crises in the 1970s and is another way to provide risk bearing entities with either coverage of protection.
A major series of alternative risk transfer would also be risk securitization which includes catastrophe bonds and reinsurance sidecars.
Then there is another kind of alternative risk transfer which is the funding risk transfer; which is when captive insurance companies are formed by firms and reinsured in order to achieve premiums that are invested or funded as a layer of insurance for the parent company in charge. Alternative risk transfer itself is used to refer to activities through which reinsurers transform risks from the capital markets into either reinsurance or insurance.
Other forms of alternative risk transfer include intellectual property insurance and automobile insurance securitization. It should be possible for you, as an insurance customer, client or an employee at an insurance company to be able to adapt all of this to other contexts.
A last possible method of risk transfer would be to facilitate the transfer of risk amongst investors who are involved in the capital market. Derivative transactions may settle based on the performance of an existing catrastrophe bond, or losses pertaining to industry etc. The structures can also be used by clients who may want a capital markets’ structure but who may however, lack the risk to transfer to ensure that the insurance of a catrastrophe bond remains cost effective.
To conclude however, there are a variety of ways that one can ensure that one can allow risk transfer and management to take place and they are all suited to everyone’s’ needs and concerns
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