Question 1
a) Define risk retention and explain why a large corporation may be able to use this technique more effectively than an individual or a small company. (5marks)
b) Giving examples in each case, differentiate between:
i) Planned and unplanned retention.
ii) Funded and unfunded retention
Are all these forms of retention appropriate risk management techniques?
(10marks)
Question 2
a) What are the roles of the transferor and transferee in risk transfer? (3marks)
b) Explain why a hold-harmless agreement may not be legally enforceable. Give an example of a situation in which the agreement likely would not be upheld by the courts. (7marks)
c) How is diversification a form of risk transfer? In what way does it result in risk reduction? (5marks)
Question 3
John your friend has attended an insurance awareness meeting in which one of the speakers has said that there are some specific doctrines that underlie the insurance contract which distinguish them from other contracts. Briefly, but clearly explain him.
(15marks)
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