1. Risk Management and Insurance
Assignment Instructions
You should attempt to answer any 4 questions from the 6
questions presented below. In terms of length, I would say that
anything from 2 to 6 pages should be sufficient. I have given you
extra time to complete the assignment but you should make sure
that you email your answers to me by the following deadline.
Deadline: Monday 7th May (week 19)
email your answers to: dcgroup@fastmail.fm
Daryl Chapman 16.04.2012
Note: The questions are on the next page.

2. Risk Management & Insurance
Answer any 4 questions from the following 6 questions:
Question 1
Assume that the chance of loss is 3 percent for two different fleets of trucks. Explain
how it is possible that objective risk for both fleets can be different, even though the
chance of loss is identical.
Question 2
Although no risk completely meets all of the ideal requirements of an insurable risk,
some risks come much closer to meeting them than others.
Task A:
Identify the ideal requirements of an insurable risk.
Task B:
Compare and contrast car collisions and war in terms of how well they meet the
requirements of insurable risk.
Question 3
The law of large numbers forms the basis of insurance. Do you agree or disagree
with this statement? Explain your answer.
Question 4
The range of risks that mangers have to worry about today has certainly become
wider. Describe what you think will be the top five risks facing companies in 10 years
time. How well generally do you think companies will be prepared to handle these top
five risks in the future?
Question 5
Since its early origins, Lloyd’s of London has developed certain important
characteristics. Briefly describe two of them. In addition, give your opinion as to how
well you think Lloyd’s of London has restructured itself to face the Insurance market
challenges of today.
Question 6
To many people derivative financial instruments have become synonymous with
financial risk. In fact, Warren Buffet, America’s most famous investor once described
derivatives as “financial weapons of mass destruction”. Do you think these rather
negative views of derivative financial instruments are justified? Explain your answer.