Haramaya University

College of Business and Economics

Department of Management
Risk Management and Insurance Group Assignment
(Weights=15%)

1. Consider the following recorded data available for a firm regarding the fleet of automobiles
and accidental losses and answer the question that follow.

Year No. of Automobiles No. of Accidents Monetary Loss

1 10 3 Birr 3,000
2 13 3 3,900
3 16 4 4,600
4 19 4 5,300

5 22 4 5,400
6 23 4 5,600
7 27 5 6,200
8 35 6 6,000
The firm is going to run 40 automobiles next year
(A) Determine the probability of an accident and the loss per accident
(B) Construct Poisson probability distribution
(C) What are the expected number of accidents and that of monetary loss?
(D) What is the probability that the firm will face losses totaling 10,000 or more?
(E) What is the probability that the firm facing some accident?
(F) Determine the standard deviation of an accidents and establish the range of an accidents
taking 2 SD as a measure of risk
(G) Calculate Rm and Rn and interpret the result
(H) Compute the standard deviation of monetary loss and establish the range of monetary loss
taking 1 SD as a measure of risk
(I) Assume the number of exposure units increased to 40, 60, and 100 from year 10 to 12
respectively and show how risk decreases with the increase in the number of cars.

1
Notice to be reminded
1. This assignment has to be submitted on the end of this course’s class ending.
2. The assignment has to be submitted only in soft copy via belewmisir@gmail.com address
3. The group members should not exceed 5 students.