Page 20 - Insurance Times JUNE 2022

Risk is a condition where there is a possibility of an adverse insurance. Technical risks exist partly due to factors outside
deviation from a desired outcome - there is no the company's area of business activities, and the company
requirement that the possibility be measurable, only that often may have little influence over these factors. The effect
it must exist. of such risks - if they materialize - is that the company may no
longer be able to fully meet the guaranteed obligations using
Managing Risk the funds established for this purpose, because, either the
claims frequency, the claims amounts, or the expenses for
The Insurance Institute of India defines that:
administration and settlement are higher than expected.
Risk Management is the identification, analysis and
When considering the technical risks, IAIS proposes
economic control of those risks which can threaten the
distinguishing between "current risks" and "special risks".
assets or earning capacity of an enterprise.
Current risks consist of the following elements:
Risk Management comprises of:
risk of insufficient tariffs,
Risk Identification
deviation risk,
Risk Analysis
risk of error,
Risk Control:
evaluation risk,
Physical risk control
reinsurance risk,
Financial risk control - Retention & Risk Transfer
operating expenses risk, and
Methods of Risk Management risks associated with major or catastrophic losses or
Business Organizations deploy a combination of accumulation of losses caused by a single event.
the below-mentioned methods of risk
As to the special risks, they can be considered to
management:
consist of the following:
Risk Avoidance
risk of excessive or uncoordinated growth, leading to a
Risk Retention
rapidly increasing claims ratio or an aggravated expenses
Risk Reduction ratio, and
Risk Pooling liquidation risk."
Risk Combination
Insurers and Reinsurers face many of the same risks that
Risk Hedging other Business Organizations face. However, for purposes of
Risk Transfer including Insurance this Technical paper, we shall confine ourselves to Insurance
Technical Risks or Insurance Risks as defined above for
It is clear from the above that Risk Transfer is only one of the Insurers. What is stated in this Technical paper applies to a
methods of Risk Management and that Insurance is only one
of the methods of Risk Transfer.

Insurance Technical Risks
The International Association of Insurance
Supervisors (IAIS) defines that:
"Insurance Technical Risks (liability risks) represent the various
kinds of risk that are directly or indirectly associated with the
technical or actuarial bases of calculation for premiums and
technical provisions in both life and non-life insurance, as well
as risks associated with operating expenses and excessive or
uncoordinated growth.
Technical risks result directly from the type of insurance
business transacted. They differ depending on the class of
20 The Insurance Times, June 2022