Page 265 - RISK Management IC 86

Fundamental risk :
Affects either society in general or groups of people and cannot be
controlled even partially by any one person. Such risk are present in
the forces of nature and the economy since the outcomes, of say, the
weather or inflation or mass unemployment are beyond individual
influence.

Interest rate risk:
Unpredictability of future interest rates, Whether a rise or fall of
interest rates has favourable or unfavourable effects on an
organization depends upon whether it is a debtor or creditor and the
extent to which its resources are committed to borrowing or lending.

Investment risk:
Possibility that an investment in a stock, bond or similar security may
lose its market value for any reason, thus, causing loss of wealth or
income to the holder of this security. This risk relates to security
market conditions.

Market risk :
Chance of loss or gain according to changes in demand or supply in a
market place, typically the market for an organization’s output. In
markets for money and securities, however, both the interest rate risk
and investment risk are, broadly speaking, market risks.

Objective risk:
Chance of loss measured by an objective probability, rather than by
judgment.

Particular risk :
Those future outcomes that we can partially (though not predictably)
control it arises from individual decisions to drive a motor vehicle, for
instance, to own property or even to cross a road.

Preferred risk:
Exposure an insurer welcomes because it promised more favourable
loss experience than other exposures in the same rating class and
therefore, should generate an underwriting profit.

Political risk :
Potential losses to foreign loss exposures caused usually by the host
government or other political forces in the host country. Illustrations
are confiscation of property, cancellation of import licenses and
kidnapping.

267