Page 142 - RISK Management IC 86

Risk Management

inadequate if in any year, the aggregate retained losses
exceed expected losses.

If a risk is insured, the impact of adverse claims
fluctuations falls on the insurer, but when a risk is internally
funded, any excess of losses over the accumulated fund
falls back on the organization, mostly treated as charge
against central reserves. Some protection can be obtained
by :
(i) Loading the periodic contributions
(ii) Establishing a fund with such a capital reserve.

The size of the reserve required to reduce a fund's
probability of ruin depend upon individual circumstances
and the method for calculation will depend on the actuaries.

It basically involves estimating the potential variations in
aggregate actual losses from the expected losses. If
alternate uses for funds. For organizations having funds
with alternate uses, they might be unwilling to block such
a fund to establish a capital.

All these covers are most readily available in reinsurance
than in direct insurance. These covers can be arranged

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