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Foundations of Casualty Actuarial Science

 identify the exposu res to possible loss;
 measure the exposures to possible loss including the

probability that they could occur and the impact the
losses could have on the financial affairs of the
person or entity;
 select the risk management alternatives to best
handle the exposures;
 implement the alternatives selected; and
 monitor the alternatives put into practice to see if
they are working as expected.

36. Risk Management Alternatives
The two main types of risk management alternatives
are risk control and risk financing. Risk control
alternatives are exposure avoidance, loss prevention, loss
reduction, segregation of exposure units, and contractual
transfer to a non-insurer in which the legal risk is
transferred. Risk financing alternatives are risk retention,
contractual transfer to a non-insurer in which the legal
risk is retained, and insurance.

37. Exposure Avoidance
An exposure may be avoided by never undertaking, or

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