East West University

Department of Business Administration

Risk Management & Insurance (FIN 410)
Summer 2021
Mid Term II

Marks: 20 Time: 80 minutes

Question No: 01 [Marks: 08]

Mr. Arcanda is owner of a chemical factory which he has been running for last 15 years successfully. But
recently by observing the devastating fire incident at Narayangonj, he is very concern about his own factory.
Though his factory is situated at Savar, he wants to secure his factory from any sort of hazards. He is
worried as most of the inventories in the factory are flammable. In this situation if a small piece of fire
occurs that may turn into a dangerous situation causing death to hundreds of employees working for the
factory. To minimize the risk, Mr. Arcanda has already installed fire distinguisher in his factory and also
has ensured sufficient fire exit. Labors are given fire training in every six months period. He also arranges
different sessions to aware everyone about fire and how to be protected from fire. In spite of taking all these
steps, he also wants to take a fire insurance policy on the factory. But he is not sure which policy covers
which losses and which policy will be preferable to him. As a student of risk management, he has asked
you the following question. So answer them

(a) If he takes a standard fire policy, for which losses he won’t get any compensation from insurance
company? [03]
(b) Differentiate between household policy and reinstatement policy? [03]
(c) What extra benefit Mr. Arcanda will get from the all risk policy in comparison to fire policy or theft
policy ? [02]

Question No: 02 [Marks 04]

(a) In case of partial loss in hull and cargo, how does an insurance company make compensation to
the policyholder?

(b) Differentiate between constructive total loss and actual total loss.
Question No: 03 [Marks 04]
In case of making claim payment in marine insurance, an insurance company collects various documents
among which one is copy of protest and other is bill of lading. Explain these documents.

Question No: 04 [Marks 04]

Describe the similarities and dissimilarities of motor insurance and aviation insurance. [Give the
answer in the aspect of coverage made by each policy]