Module 05- Measuring Risks

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ryyrunaarel

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Instructions:

You will assume the role of a senior analyst hired by a fictitious company, Premium Acceptance, a mid-sized property insurance carrier. Premium Acceptance is performing well with respect to several key performance indicators, including policies in force, policy retention, and new business counts.

One of your objectives as the newly appointed senior risk analyst is to develop a framework for managing loss ratios which is one of the firm's largest key performance indicators. A loss ratio is simply the difference between the ratio of claims paid by an insurance carrier and the ratio of premiums paid. The board of directors depends on the ability to forecast loss ratios, which in turn enables them to forecast profitability metrics to the shareholders. The organization will now consider implementing the use of statistics for measuring risks.

Your deliverable should be composed in a report. Be sure to address the following items:

  • Explain how statistics is used to formally define risk in the risk assessment process.
  • Discuss at least two statistical tools that can be employed to measure risk.
  • Convey which tool best serves the company's purposes and explain why it is.
  • What are the ramifications of the organization electing not to use statistics in this process?

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Explanation & Answer

Attached.

Running head: MEASURING RISK

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Measuring Risk
Name
Institution

MEASURING RISK

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Measuring Risk

Statistics is important in risk definition as it helps in the indication of the probability of
the different variables through assessing the different values. The use of the statistical methods
observes the different parameters and this involves the functioning of the different concepts and
the delivery of the measures that helps in focusing on the different returns. In the definition of
risk, the statistical measures helps in the distributi...


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