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Risk = Unforeseen Loss = Claims + Legal + Reinsurance (+reinvestments) -…
Risk = Unforeseen Loss
=
Claims + Legal + Reinsurance
(+reinvestments)
Claims
True Claims
Amount lost due to unanticipated events, catastrophic events
Operational Inefficiency
Loss in revenue = unoptimized premiums - higher payout
due to underwriting risks of risk assessment
Loss due to operational delays
Loss on claims settled for fraud identified as true claims
False Claims
Misrepresentation
Partial claims settled due to misrepresented facts
Fraud
Fraud Identified correctly
Legal
Loss of revenue from liquidating investments in order to cover for low IBNR reserves
Loss of money from business disruption due to Solvency risks leading to Regulatory bodies taking over
Penalties and Monetary loss from inaccurate and late filings
Unanticipated claim volume to be met because of change in laws resulting in broader coverage -find example
Reinsurance
Significant loss of money due to counterparty default
Residual risk (discrepancies between reinsurance needs and actual coverage from re-insurer)
Monetary loss when amount received from re-insurer does not match the losses incurred