Name: Md.

Ashikuzzaman
Id: 1821563
Fin440
Ans to the Question no 1
The term risk is used in many ways, and is given different definitions depending on the field
and context. Common to most definitions of risk is uncertainty and undesirable outcomes. It is
an uncertain event or set of events which, should it occur, will have an effect on the
achievement of objectives; a risk is measured by a combination of the probability of a perceived
threat, and the magnitude of its impact.
Risk implies future uncertainty about deviation from expected earnings or expected outcome.
Risk measures the uncertainty that an investor is willing to take to realize a gain from an
investment. When an entity makes an investment decision, it exposes itself to a number of
financial risks. The quantum of such risks depends on the type of financial instrument. These
financial risks might be in the form of high inflation, volatility in capital markets, recession,
bankruptcy, etc. Generally, investments giving lower returns come with lower risks as well. On
the other hand, investments giving higher returns involve higher risks. For example, a fixed
deposit is considered a less risky investment. On the other hand, investment in equity is
considered a risky venture

Risks are of different types and originate from different situations. We have liquidity risk,
sovereign risk, insurance risk, business risk, default risk, etc. Various risks originate due to the
uncertainty arising out of various factors that influence an investment or a situation.
In an investor context, risk is the amount of uncertainty an investor is willing to accept in regard
to the future returns they expect from their investment. Risk tolerance, then, is the level of risk
an investor is willing to have with an investment and is usually determined by things like their
age and amount of disposable income.

Ans to the Question no 2

Five types of risk
1. Business risk
2. Financial risk
3. Liquidity risk
4. Country risk
5. Exchange rate
Ans to the Question no 3
Risk management process are

Ans to the Question no 4

5 types of risk management
1. Financial risk management
2. Commodity risk management
3. Enterprise risk management
4. Credit risk management
5. Operational risk management

Ans to the Question no 5

In the present day we all know form of insurance, the concept of such a philosophy of grouping
together or risk sharing developed in very ancient times. We can probably go back to the 4th
century which witnessed the practice of BOTTOMRY BONDS and RESPONDENTIA
BONDS in maritime trade.

BOTTOMRY BONDS: Bottomry, a maritime contract by which the owner of a ship borrows
money for equipping or repairing the vessel and, for a definite term, pledges the ship as
security—it being stipulated that if the ship be lost in the specified voyage or period, by any of
the perils enumerated, the lender shall lose his money. The terms of repayment were exactly
the same. The practice has been abandoned since the 19th century because of tremendous
advancement in a communication system.
RESPONDENTIA BONDS: Similar to bottomary bond, this respondentia bond also
represents a monetary loan borrowed by the master of a ship to meet certain urgent expenses.
The loan is raised on the security of the cargo only. This loan is to be repaid within a certain
number of days after the arrival of the cargo at the destination as specified in the respondentia
bond. If the cargo at the destination as specified in the respondia bond. If the cargo is lost on
its way, the lender loses his money.

Ans to the Question no 6

MARINE INSURANCE is as old as Civilization. Marine insurance we know today can be
describe as mother of all insurance. It believed to have originated in England owning the
frequent movement of ships over high sales for commerce and trade. Code of Manu contains
rules for Marine Contracts which were observed by Traders from Bharuch and Surat who
traded with merchants in Sri-Lanka, Egypt and Greece. System of executing Jokhami Hundies
- The Hundies were drawn on the Goods shipped on the vessel mentioned in the Hundi. The
Insurer purchased the Hundi from the Seller/Exporter by paying the value of the Goods upfront
and was entitled to receive this value + Insurance Premium = Value of the Hundi in case the
vessel reached safely and the Hundi value recovered from the Buyer /Importer. RHODIANS
introduced MARITIME CUSTOMS AND PRACTICES during 900 B.C. They also introduced
the concept of general averange.
Marine is the oldest form of insurance and came first on the list. This type of insurance probably
began in Northern Italy sometime during the 12th & 13th Century and gradually the concept
was rather transferred to or taken over by the United Kingdom. During the 13th/14th century,
the Italian merchants went to The U. K. and along with the merchandise carried with them the
trading customs including, the concept of marine insurance. Marine insurance as such was not
being practiced as a separate specialized entity during that time since it was the merchants who
used to transact marine insurance business side by side with their general trading activities.
Lombard Street: Gradually the Lombard street of England (named after the merchants of
Lombardy of Italy) started becoming the nerve- centre of marine insurance activities as it was
here where the merchants used to assemble for the purpose of trade and insurance protection.
However, problems used to arise as there were no set rules or regulations for settling disputes
arising out of marine policies and it was the Lombard street customs that used to influence the
settlement of such disputes. Practices were there to refer disputes to Admiralty Court but it had
the drawback of not having special knowledge of the Law of Merchants or of Lombard Street
customs.
Ans to the Question no 7
At first The Great Fire of London in 1666 practically demonstrated the necessity and urgency
of fire insurance. When The insurers who had hitherto been doing marine were contemplating
about starting the fire insurance business also. About seven insurance companies came forward
to provide fire insurance protection. But due to the introduction of newer types of hazards
arising out of Industrial Revolution of the 19th century then increased demand for such type of
insurance, then some more companies had to come into the picture.

The Toole Street Fire, 1861 had an influence in improving the business of fire insurance as it
demonstrated that classification of risk was necessary for the sound rating system. In 1868 the
Fire Offices Committee (FOC) was formed which has multifarious responsibilities like,
uniform rating, statistics, and various technical advice to member companies. Subsequently
also developed various other bodies, such as Joint Fire Research Organization, Salvage
Corporations and more who are directly and indirectly helping the fire insurance business on a
sound scientific line.

Ans to the Question no 8

The coffee houses of London have indeed played a very vital role in the development of trade
and commerce of the U.K. It is in such houses that the merchants and traders used to congregate
for their business transactions. coffee house was opened by Edward LLOYD in 1680 where
the merchants used to frequent their visits. Auctions of ships, insurance coverage etc. used to
take place here and gradually it became a place of shipping intelligence. Since later part of the
17th century and early 18th century, this coffee house virtually turned into the most famous
LLOYD’S which can boast of being the strongest and soundest insurance organization all over
the world. The monopolies granted to two insurance companies previously by the Bubble Act
1720 were subsequently repealed and now numbers of insurance companies and individual
insurers are operating as marine insurers in the U. K. The present Act regulating the marine
insurance business is The Marine Insurance Act, 1906 and this Act is followed in our country
also.
Ans to the Question no 9
5 Types of insurance
1. Life Insurance
2. Fire Insurance
3. Property Insurance
4. Liability Insurance
5. Social Insurance

Ans to the Question no 10

In 1693 Edmond Hailey English astronomer mathematician first introduced the mortality table
and giving a definite value to risk of death. Then Dodson shown that it was possible to charge
level premium throughout the duration of the policy period. At last in 1774, the Life Assurance
Act was passed in the British parliament requiring the presence of insurable interest before one
could affect a life policy on the life of another.
The insurer will pay the fixed amount of insurance at the time of death or at the expiry of a
certain period. The two basic types of life insurance are Traditional Whole Life and Term Life.
Whole Life is a policy you pay on until you die and Term Life is a policy for a set amount of
time. You should seek the advice of a financial expert when planning your life insurance needs.
There are considerable differences between the two policies. In deciding between these two,
consumers should consider their age, occupation, number of dependent children and other
factors to ensure they have the coverage necessary to protect their families.
Ans to the Question no 11
An insurance broker is someone who works for the policy owner. He’s distributing the products
of different insurance carriers and he is independent. Insurance brokers act as intermediaries
between insurance companies and insurance buyers.
Provided services are
1. Risk management services
2. Loss control services
3. Claims management services
4. Mergers and acquisitions (help facilitate transactions and manage risks)
5. Employee benefits
insurance broker company name is BIBA

Ans to the Question no 12

According to the Kaiser/HRET survey, the average premium cost to the employee in an
employer sponsored health care program was around $4,100. With rising co-payments, yearly
deductibles and dropped coverage's, health insurance has become a luxury less and less can
afford, yet even a minimal policy is better than having no coverage. The cost for a day in the
hospital can range from $985 to $2,696. Even if you have minimal coverage, it can provide
some monetary benefit for your hospital stay.

Ans to the Question no 13

Insurance contributes a lot to the general economic growth of the society by provides stability
to the functioning of process. The insurance industries develop financial institutions and reduce
uncertainties by improving financial resources.

Contributions of insurance are

1. Provide safety and security

2. Generates financial resources
3. Life insurance encourages savings
4. Promotes economic growth
5. Medical support
6. Spreading of risk
Ans to the Question no 14
An insurance premium is the amount of money an individual or business pays for an insurance
policy. Insurance premiums are paid for policies that cover healthcare, auto, home, life, and
others. Once earned, the premium is income for the insurance company. It also represents a
liability, as the insurer must provide coverage for claims being made against the policy.
When you sign up for an insurance policy, your insurer will charge you a premium. This is the
amount you pay for the policy or the total cost of your insurance. Policyholders may choose
from a number of options for paying their insurance premiums. Some insurers allow the
policyholder to pay the insurance premium in installments monthly or semi-annually while
others may require an upfront payment in full before coverage starts.
Ans to the Question no 15
A charter party is a contract between a ship-owner and a charterer who wishes to
charter(“higher”) a vessel or part of a vessel for the carriage of cargo.

The charter party will clearly and unambiguously set out the rights and responsibilities of the
ship owner and the charterers and any subsequent dispute between them will be settled in the
court of law or any agreed forum with reference to the agreed terms and conditions as embodied
in the charter party.
The name "charter party" is an Anglicization of the French charter parties, or "split paper”, a
document written in duplicate so that each party retains half.

The main three types of charter party are: Time voyage and demise
For example,

Ship-owner Ship-broker Charter

Ans to the Question no 16

A bill of lading (BL or BoL) is a legal document issued by a carrier to a shipper that details the
type, quantity and destination of the goods being carried. A bill of lading also serves as a
shipment receipt. when the carrier delivers the goods at a predetermined destination. This
document must accompany the shipped products, no matter the form of transportation,
and must be signed by an authorized representative from the carrier, shipper and receiver.
The main three functions:
First, it is a document of title to the goods described in the bill of lading.
Secondly, it is a receipt for the shipped products.
Finally, the bill of lading represents the agreed terms and conditions for the transportation of
the goods.

Ans to the Question no 17

Underwriter work: The underwriter protects the company by enforcing the underwriting rules
and assessing risks based on this understanding. An underwriter also has the ability to decide
above and beyond the basic guidelines how the company will respond to the risk opportunity
an underwriter can bend the rules and make exceptions or alter conditions in order to make a
situation less risky. Underwriters can also decide if they feel a risk is too high and cancel a
policy or refuse to offer insurance.
For Example: Karim has had three water damage claims in the past six years. They were all
from the same source because Karim refuses to change anything in his home to prevent the risk
from reoccurring. The underwriter has refused to continue to insure him because nothing has
changed to make the risk any safer. Although some high-risk insurers might take Karim on,
even they might ask that the source of damage first is rectified or that preventative measures
be taken. They might also agree to insure Karim’s home for fire only, excluding water damage.