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1. A chance of loss or no loss, but no chance of gain. ARS Pure risk 2. A chance of loss, no loss, or gain. AAS speculative risk 3. The risk that customers or other creditors will fail to make promised pay- ments as they come due ARS credit risk 4. The perceived amount of risk based on an individual's or organization's opinion. (ARS subjective risk 5. The measurable variation in uncertain outcomes based on facts and data.- ARS objective risk 6. uncertainty over the magnitude of cash flows due to possible changes in output and input prices ARS price risk 7. Arisk that affects only some individuals, businesses, or small groups. (ARS di- versifiable risk 8. The potential for a major disruption in the function of an entire market or financial system. AAS systemic risk 9. arisk that affects the entire economy or large numbers of persons or groups within the economy ARS nondiversifiable risk 10. Uncertainty about an investment's future value because of potential changes in the market for that type of investment ARS Market risk 11. The risk that an asset cannot be sold on short notice without incurring a loss ARS Liquidity risk 12. Arises from property, liability, or personnel loss exposures (ARS Hazard Risk (ERM) 13. arises from people, process, systems, or controls \ARS operational risk (erm) 14. Arises from the effect of market forces on financial assets or liabilities JARS fi- nancial risk (erm) 15. Arises from trends in the economy and society AAS Strategic risk (erm) 16. Any condition that presents a possibility of gain or loss, whether or not an actual loss occurs. (ARS Exposure 17. Frequent fluctuations, such as in the price of an asset. Aas Volatility 18. A qualitative estimate of the certainty with which the outcome of a specific event can be predicted. (ARB Likelihood 24. The relationship between two events, where the second is brought about by the first Aas Causality 25. An analysis that identifies patterns in past data and then projects these patterns into the future WAS Trend analysis 26. A statistical technique that is used to estimate relationships between variables. Ans Regression analysis 27. A form of regression analysis that assumes that the change in the de- pendent variable is constant for each unit of change in the independent variable. AS Linear regression analysis 28. A technique for forecasting events, such as accidental and business loss- es, on the assumption that they are governed by an unchanging probability distribution. WS Probability analysis 29. A presentation (table, chart, or graph) of probability estimates of a partic- ular set of circumstances and of the probability of each possible outcome. ARS - Probability distribution 30. Probability that is based on theoretical principles rather than on actual experience. ARS Theoretical probability 31. A probability measure that is based on actual experience through histori- cal data or from the observation of facts. 4/ AAS empirical probability 32. A mathematical principle stating that as the number of similar but inde- pendent exposure units increases, the relative accuracy of predictions about future outcomes (losses) also increases. ARS law of large numbers 33. A technique to quantify financial risk by measuring the likelihood of losing more than a specific dollar amount over a specific period of time. ARS Value at risk 34. A technique to assess earnings volatility by measuring the likelihood that earnings will be below a specific dollar amount over a specific period of time AAS Earnings at risk 35. A technique to quantify the likelihood of losing a specific dollar amount that exceeds the VaR threshold ARS Conditional value at risk 36. Statistical probability estimations of extreme deviations from the median of probability distributions As Extreme value theory 37. Any action by a government that favors domestic over foreign organiza- tions or poses a threat to foreign organizations ARS Political risk 38. The representation of probability by means of expert input regarding the likelihood of event outcomes AAS Judgments of relative likelihood 39. A collaborative estimating strategy using expert input to reach consensus by continuously refining individual responses 41. A financial statement that reports assets, liabilities, and owner's equity on a specific date. AS Balance sheet 42. The financial statement that reports an organization's profit or loss for a specific period by comparing the revenues generated with the expenses incurred to produce the revenues AAS Income statement 43. The financial statement that summarizes the cash effects of an organiza- tion's operating, investing, and financing activities during a specific period. ARS - Statement of cash flows 44. A contractual provision that obligates one of the parties to assume the legal liability of another party. ARS Hold harmless agreement 45. Amethod of analysis that identifies conditions that increase the frequency or severity of loss ARS Hazard analysis 46. In financial statements, a liability on an insurer's balance sheet that shows the estimated amount that will be required to settle claims that have occurred but have not yet been paid. WAS Loss reserve 47. An insurer's assets minus its liabilities, which represents its net worth. Ans - Policyholders surplus 48. The expense that an insurer incurs to investigate, defend, and settle claims according to the terms specified in the insurance policy. 7/ Ans Loss adjustment expense 49. Estimates of the future expense that an insurer expects to incur to inves- tigate, defend, and settle claims for losses that have already occurred. AAS Loss adjustment expense reserves 50. Losses that have been paid to, or on behalf of, insureds during a given period. ARS Paid losses 51. The losses that have occurred during a specific period, no matter when claims resulting from the losses are paid. ARS Incurred losses 52. A reserve established for losses that reasonably can be assumed to have been incurred but not yet reported (ARS Incurred but not reported (IBNR) losses 53. Amethod of organizing ratemaking statistics that uses incurred losses for an accident year, which consist of all losses related to claims arising from accidents that occur during the year, and that estimates earned premiums by formulas from accounting records. AAS Accident-year method 54. The final paid amount for all losses in an accident year. AAS Ultimate loss 55. The increase or decrease of incurred losses over time. (ARS Loss development 56. a loss reserve assigned to an individual claim (ARS Case reserve 57. Reserves established for the settlement of an entire group of claims. WAS Bulk reserves adjusting expenses. ARS Loss costs 67. The price of the insurance coverage provided for a specified period WAS Pre- mium 68. The amount that is included in an insurance rate to cover the insurer's expenses and might include loss adjustment expenses but that excludes investment expenses ARS Pure premium 69. income an insurer earns from premiums paid by policyholders minus incurred losses and underwriting expenses AAS Underwriting profit 70. A statistical technique for analyzing environmental changes and projecting such changes into the future. AS trending 71. interest, dividends, and net capital gains received by an insurer from the insurer's financial assets, minus its investment expenses ABS Investment income 72. a method for calculating insurance rates using estimates of future loss- es and expenses, including a profit and contingencies factor AAS Pure premium method 73. Amethod for determining insurance rates based on a comparison of actual and expected loss ratios AHS Loss ratio method 74. A method for determining insurance rates that relies heavily on the expe- rience and knowledge of an actuary or an underwriter who makes little or no use of loss experience data AAS Judgement ratemaking method 75. An independent organization that works with and on behalf of insurers that purchase or subscribe to its services ARS Advisory organiztion the number of exposure units increases ARS credibility 84. A factor applied to the rates for basic limits to arrive at an appropriate rate for higher limits ARS Increased limit factor 85. A conscious act or decision not to act that reduces the frequency and/or severity of losses or makes losses more predictable. ARS Risk control 86. The level of risk remaining after actions are taken to alter the level of risk. (ARS Residual risk 87. A risk control technique that involves ceasing or never undertaking an activity so that the possibility of a future loss occurring from that activity is eliminated. ARS Avoidance 88. A risk control technique that reduces the frequency of a particular loss. Ans - loss prevention 89. Arisk control technique that reduces the severity of a particular loss. (ARS Loss reduction 90. A risk management technique in which the insured prepares for a loss before it occurs. (AWS Disaster recovery planning 91. Arisk control technique that isolates loss exposures from one another to minimize the adverse effect of a single loss. ARS Separation 92. A risk control technique that uses backups, spares, or copies of critical property, information, or capabilities and keeps them in reserve. aS Duplication WS End effect 102. An analysis that identifies the critical components of a system and ranks the severity of losing each component. ARS Criticality analysis 103. A product of consequence and occurrence ranking, taken from the risk priority number calculation, used to determine the relative risk of a failure mode and effects analysis item. ARS Criticality 104. The product of rankings for consequence, occurrence, and detection used to identify critical failure modes when assessing risk within a design or process. ARS risk priority number 105. An analysis that takes a particular system failure and traces the events leading to the system failure backwards in time. AAS Fault tree analysis 106. A measurement that defines how successfully an organization is pro- gressing toward its long-term goals. ARS Key performance indicator 107. An element, necessary for an organization's success, that is derived from a strategic objective. (ARS Critical success factor 108. The amount of uncertainty an organization is prepared to accept in total or more narrowly within a certain business unit, a particular risk category or for a specific initiative. AS Risk tolerance 109. A tool used by an organization to measure the uncertainty of meeting a 16/ strategic business objective. ARS Key risk indicator 119. A measure of dispersion between the values in a distribution and the expected value (or mean) of that distribution, calculated by taking the square root of the variance (ARS Standard deviation 120. the identification of the first accidental event related to a product or process that could result in unwanted consequences ARS Starting point 121. Provides a visual graph of a decision, sometimes using mathematical probabilities, to construct a model showing the known and unknown forces related to a decision AS Influence diagram 122. Simulates a catastrophic event Where are future catastrophes likely to occur? How large or severe are they likely to be? How frequently are they likely to occur? AAS Hazard Component 123. Estimates the economic impact Building and contents damagelloss and time to replace Business Interruption (BI) and Alternate Living Expenses (ALE) AAS Engineering component 124. Applies (re)insurance contract terms Socioeconomic factors (eg. fraud) as well as demand surge can also be modeled ARS Financial component 125. the long-term average loss expected in any one year for in-force policies for the modeled risk Referred to as the catastrophe cost or pure premium 20/ 
