1) One of the main disadvantages of parametric insurance is basis risk. elaborate.

2) Assume you are interviewing for a risk manager job at a very large, unique organization. Given that the organization is the only one of its kind on Earth, it is not part of any industry. The organization employs over 100,000 workers in 100 different countries.

(1) GiveTHREEreasons for this particular organization to use a captive. Be specific.

(2) Describe a specific captive arrangement that would allow this organization to manage its risks while achieving the most benefits.