Risk Retention Research Articles

Systematic Risk Management Approach for Construction Projects

Risk is inherently present in all construction projects. Quite often, construction projects fail to achieve their time, quality, and budget goals. A risk model entitled construction risk management system (CRMS) is introduced to help contractors identify project risks and systematically to analyze and manage them. The CRMS model is a logical substitute for the traditional intuitive unsystematic approach currently used by most contractors. The influence diagramming technique and Monte Carlo simulation are used as tools to analyze and evaluate project risks. Alternative risk management strategies are suggested. Such strategies include: risk avoidance, risk transfer, risk retention, loss reduction, and risk prevention and insurance.

The Risk Retention Act of 1986: Effects on Insurance Firm Shareholders' Wealth

The Risk Retention Act of 1986: Effects on Insurance Firm Shareholders' Wealth

Risk Retention Group Eyed by Academy

Risk Retention Group Eyed by Academy

Risk retention act: Implications for hospitals

Risk retention act: Implications for hospitals

Risk Retention Act Passed; Other Issues Unresolved

Risk Retention Act Passed; Other Issues Unresolved

Factors in determining an insurance company's risk retention

Factors in determining an insurance company's risk retention

Risk Management and the Theory of the Firm: Author's Reply

The purpose of Risk Management and the Theory of the Firm was to show how risk management decisions could be integrated into the overall objectives of the firm. The model chosen to represent firm objectives was the capital asset pricing model (CAPM). The thrust of the article was that instead of taking risk and return as given, the firm could alter those parameters through its retention-insurance decisions. This application is directly analogous to the use of the CAPM in making decisions about new investment projects. The latter topic has been considered in numerous articles in the economics and finance literature. notable contribution in this regard is the paper by Greenberg, Marshall, and Yawitz (5). The financial economics literature on this topic is reviewed in Baron (1). Brian Main makes two points about my article: (1) should have considered systematic risk rather than variance; and (2) 1 should have considered the supply side (i.e., the insurance company side) of the market for insurable risk as well as the demand side of the market. Both points are of interest in discussing applieations of economic models in risk management. Contrary to Mr. Main's implication, however, neither of these points was ignored in my article. Regarding the former, noted the potential restrictiveness of the assumption that apjml/D = 0, where pjm is the correlation coefficient of the firm's returns with returns on the market portfolio. then gave the first-order maximization condition that would apply if this assumption were removed (see equations (4) and (5) of the article), and commented: Readers concerned about the assumption that apjm/aD = 0 may wish to reformulate the analysis in terms of [the revised first-order condition]. I With respect to the second point, indicated the following: A noteworthy assumption in this analysis is that the firm can obtain a net savings by varying its degree of pure risk retention. Such a savings is not necessarily available in the world of perfect markets and the assumption is equivalent to the introduction of a degree of imperfection in the insurance market. 2 Consider the latter point first. In essence, the assumption about imperfections means that noninsurance firms and insurance companies have different perceptions about the value of pure risks. If they arrived at precisely the same

Optimal risk retention under partial insurance

This paper examines the situation where a risk-averse insured determines the optimal amount of deductible (or stop-loss) insurance. The insurer uses two different premium principles, the expected value principle and the exponential principle. The insured has an exponential utility function. Specific numerical results are obtained for the optimal stop-loss limit in the case of a group life insurance plan. The exact results are contrasted with those obtained by using the normal approximation instead of the exact distribution of aggregate claims.

Epidemiologic contributions to multiple sclerosis: an overview.

Geographically, multiple sclerosis (MS) seems to be distributed into three zones of high, medium, and low frequency. High-frequency areas, with prevalence rates over 30 per 100,000 population, include Europe between 65° and 45° north latitude, southern Canada and the northern United States, and New Zealand and southern Australia. These regions are bounded by areas of medium frequency with prevalence rates of 5 to 25 per 100,000, which include southern Europe, the southern United States, and most of Australia. Known areas of Asia and Africa (save for one white group in South Africa) are all low, with prevalence rates under 5 per 100,000 population. All high- and medium-risk areas are among predominantly white populations: In America, blacks and Orientals have much lower rates of MS than whites but still demonstrate the geographic gradients found for whites. Migration studies indicate that on the whole, migrants retain much of the risk of their birthplace. However, this risk is clearly not defined at birth: MS death rates for migrants born in one risk area and dying in another are intermediate between the rates characteristic of their birthplaces. Prevalence studies for migrants from high- to low-risk areas indicate the age of adolescence to be critical for risk retention; those migrating under age 15 years acquire the lower risk of their new residence. Furthermore, several low-to-high studies show that those migrating in childhood or adolescence increase the risk of MS. The migrant data, plus the geographic distributions, serve to define MS as an acquired, exogenous (environmental) disease whose acquisition in ordinary circumstances takes place years before clinical onset. The data fit best the “simple” or “prevalence” hypothesis: that the cause of MS will be found where the clinical disease is common. Further evidence for this viewpoint is provided by the occurrence of two epidemics of MS: one (definite) in the Faroe Islands, the other (probable) in Iceland. Both followed the occupation of those lands by British forces during World War II. If this relation is causal, MS is not only acquired but also transmittable.

Risk Retention and the Market Implied Probability of Loss

The risk retention decision is a classic example of decision making under conditions of uncertainty. A cost savings may be obtained by the firm in exchange for accepting additional risk through risk assumption, but little attention has been directed toward optimizing this tradeoff for the firm. In this paper, the authors develop a model which uses the probability of loss to evaluate deductible selection. The advantage of this model is that it leads to decisions that are optimal for the firm.

Geography in multiple sclerosis.

Both mortality and morbidity data indicate quite clearly that multiple sclerosis is a geographically-related disease, and thus MS can be thought of as an acquired environmental (exogenous) illness. High frequency parts of the world for MS are Europe between 65 degrees and 45 degrees north latitude, northern United States and southern Canada, New Zealand, and southern Australia. These regions are bounded by medium frequency MS regions: in Europe to the north, east, and south; in America for southern U.S.; and the remainder of Australia. Latin America, Asia and Africa are essentially of low frequency from present data. Latitude is not a sufficient criterion: at 40 degrees north latitude, MS is high in America, medium in Europe, and low in Asia. All high and medium risk areas therefore are in Europe or European colonies; thus MS is the white man's burden spread from western Europe. Within the U.S., MS is less common among Negroes, Japanese, and possibly Amerindians than in whites regardless of geography. Migration studies among risk areas indicate that migrants keep much of the risk of their birthplace, but also that overall the risk is decreased by high-to-low migration, and probably increased by low-to-high. For the former, it seems that adolescence is the age critical for retention of birthplace risk. Some preliminary data on a possible epidemic of MS are also presented. All the epidemiologic information would be most easily explained if MS were an infectious (viral) illness with prolonged latency. The proof of this though must come from the laboratory.

Corporate Self-Insurance and Risk Retention Plans

Corporate Self-Insurance and Risk Retention Plans