You are the risk manager for Big Retail REIT, an owner of 100 large retail properties across the country. We are currently in the middle of year 6 and Finance has asked you to forecast losses for year 7, you have decided to tackle your most frequent type of loss first, the good old slip/trip and fall !

You are the risk manager for Big Retail REIT, an owner of 100 large retail properties across the country.

We are currently in the middle of year 6 and Finance has asked you to forecast losses for year 7, you have decided to tackle your most frequent type of loss first, the good old slip/trip and fall !

You have pulled total incurred loss figures for the past five years. You have also pulled the revenues for the same time period as well as revenue projections for year 7.

1- Reviewing and organizing your Data:

a) Review the data and decide on an individual loss limit is. Explain why you set this limit.

– Do not worry about loss development factors, or trend factors. Assume they are built into the existing data.

2- Discuss where and how loss development and trend factors would apply to this company. Why is it important to consider them ?

3- Forecasting:

a) Forecast your losses for year 7based on the Loss Limit you set above (assuming that trend factors and loss development factors are already built into the numbers)

b) Use the increased limits factors in the text on page 2.16 to calculate the increased limit forecast based on the loss limit you chose above plus one other.

c) Show your work (spreadsheet)

4- Financing the Risk:

a) What type of plan would you use in order to capture this exposure ? If you are buying insurance, what type of limits would you set ? Retentions ? Provide reasons for your answer and consider the risk financing goals on page 1.7 of the text, your above answers, and the total dollars spent on claims.

Requirements:

Risk Financing: Assignment #1

You are the risk manager for Big Retail REIT, an owner of 100 large retail properties across the country.

We are currently in the middle of year 6 and Finance has asked you to forecast losses for year 7, you have decided to tackle your most frequent type of loss first, the good old slip/trip and fall!

You have pulled total incurred loss figures for the last five years. You have also pulled the revenues for the same time period as well as revenue projections for year 7.

Reviewing and Organizing your Data

Review the data and decide on an individual loss limit is. Explain why you set this limit.

Do not worry about loss development factors, or trend factors. Assume they are built into the existing data.

Discuss where, and how loss development and trend factors would apply to this company. Why is it important to consider them?

Forecasting

Forecast your losses for Year 7 based on the Loss Limit you set above (assuming that trend factors and loss development factors are already built into the numbers)

Use the increased limit factors in the text on 2.16 to calculate the increased limit forecast based on the loss limit you chose above plus one other.

Show your work (spreadsheet)

Financing the Risk

What type of plan would you use in order to capture this exposure? If you are buying insurance, what type of limits would you set? Retentions? Provide reasons for your answer and consider the risk financing goals on page 1.7 of the text, your answers above, and the total dollars spent on claims.