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Insurance is the equitable transfer of risk of a loss, from one entity to another in exchange for payment. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.

According to study texts of The Chartered Insurance Institute, there are the following categories of risk:

  1. Financial risks which means that the risk must have financial measurement.
  2. Pure risks which means that the risk must be real and not related to gambling
  3. Particular risks which means that these risks are not widespread in their effect, for example such as earthquake risk for the region prone to it.

It is commonly accepted that only financial, pure and particular risks are insurable.

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Risk Management is a strategic business discipline that supports the achievement of an organization’s objectives by addressing the full spectrum of its risks and managing the combined impact of those risks as interrelated risk portfolio.*

*Risk Insurance Management Society

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Historical View

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Today

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Hazard Risk Management

Insurable financial risks

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Enterprise Risk Management

Operational, strategic, financial reputation and insurable risks

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Focus on preservation of

tangible assets

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Recognition of the value of

tangible and intangible assets

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Silo Approach

Each department/function manages its risks independently

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Holistic approach

Coordinated at the highest level within the organization

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Risk management = separate function

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Risk management is a corporate wide daily concern and is embedded in the operations

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Risks are threats – Focused on avoidance of negative events

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Risks can be threats and opportunities

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