Q.1.1

SIPs enable the insurer to manage losses in a structured manner through the following characteristics, risk transfer, risk spread/risk combination, aggregate limits, and commutation. Explain these characteristics.

(12)

Q.1.2

What risk can a business face due to a supplier and what are the risk control steps that a business can put in place regarding its suppliers? Provide examples to illustrate your answer further.

(14)

Q.1.3

Cost-of-risk is the sum of insurance costs; unreimbursed losses; risk control and loss prevention expenses; and administrative costs. Discuss administrative costs. Provide a practical example to explain administrative costs.

(8)

Q.1.4 Apply the fundamental concepts included in the definition of enterprise risk management (ERM) to a business of your choosing. (16)