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How Is Risk Transfer Accomplished?
by 趙永祥 2019-02-25 06:38:24, 回應(0), 人氣(742)
How Is Risk Transfer Accomplished?
How Is Risk Transfer
Accomplished?
Insurance
Risk transfer is most often accomplished through an insurance
policy. This is a voluntary arrangement between two parties, the
insurance company and the policyholder, where the insurance
company assumes strictly defined financial risks from the
policyholder. In very simple terms, if a worker is injured, the
insurance company pays the cost. If a building burns down, the
insurance company pays to replace it.
Insurance companies
charge a fee, or an insurance premium, for accepting this risk. In
addition, there are deductibles, reserves, reinsurance and other
financial agreements that modify the financial risk the insurance
company assumes.
Contracts
Risk transfer can also be accomplished through non-insurance
agreements such as contracts. These contracts often include
indemnification provisions.
An indemnity clause is a contractual provision in which one
party agrees to answer for any specified and unspecified liability
or harm that the other party might incur. An indemnity clause
also can be termed a hold-harmless or save-harmless clause.
Indemnification agreements are completely independent of
insurance coverages and transfer the financial consequences
of legal liability from one party, the indemnitee, to another, the
indemnitor. In addition to direct financial losses, some contracts
may also transfer legal defense or product recall costs.
Layers of Protection
There are several ways to provide layers of protection for your
assets, including:
• Certificates of insurance.
• Additional insured status.
• Indemnification provisions in contracts and leases.
Faculty, Dep. of Finance, Nan Hua university
(南華大學財務金融學系暨財務管理研究所 專任助理教授)
25- February- 2019