Principles of Risk Management and Insurance, 13th Edition

Summary

• There is no single definition of risk. Risk historically has been defined as uncertainty concerning the occurrence of a loss.

• A loss exposure is any situation or circumstance in which a loss is possible, regardless of whether a loss occurs.

• Objective risk is the relative variation of actual loss from expected loss. Subjective risk is uncertainty based on an individual’s mental condition or state of mind.

• Chance of loss is defined as the probability that an event will occur; it is not the same thing as risk.

• Peril is defined as the cause of loss. Hazard is any condition that creates or increases the chance of loss.

• There are four major types of hazards. Physical hazard is a physical condition that increases the frequency or severity of ...