2. The concept of risk
• Risk is the ‘effect of uncertainty on objectives’—the
chance of something happening.
• In the context of insurance it means the possibility of
an adverse outcome from a particular event.
• Insurance is only concerned with adverse outcomes
that involve the risk of financial loss.
2
4. What are insurable risks?
• For a risk to be insurable:
– the loss must be fortuitous (accidental)
– there must be an insurable interest at the time the
loss occurs
– the loss must not be excessive or catastrophic
– it must not be against the public interest.
4
5. Reinsurance
• Reinsurance allows insurers to reduce their
exposure to particular risks by transferring part of
the risk to a reinsurer, thereby increasing their
capacity to accept additional risks;.
• The types of reinsurance methods are:
– treaty
– facultative.
5
6. Insurance in society
• The functions of insurance in society include:
– bearing risk
– stimulating business enterprise
– freeing up capital
– encouraging efficiency in commerce by providing
peace of mind and security
– promoting loss prevention
– assisting business survival.
6
7. Session 2 – The regulatory framework
• This session covers:
– key insurance regulators and organisations
– insurance laws and consumer protection legislation
– other important Acts and Codes
– complaints and dispute procedures.
7