W1-2-60-1-6

JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY

UNIVERSITY EXAMINATIONS 2021/2022
SECOND YEAR SECOND SEMESTER EXAMINATION FOR THE DIPLOMA
IN BUSINESS MANAGEMENT
HCB 0207: INSURANCE AD RISK MANAGEMENT
DATE: APRIL 2022 TIME: 1.30 HOURS
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INSTRUCTIONS: ANSWER QUESTION ONE [COMPULSORY] AND
ANY OTHER TWO QUESTIONS
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QUESTION ONE [30 MARKS]
(a) The table below shows the estimated expected returns on a portfolio of
investments A and B constructed to diversify a way some business risk in
Pema Ltd. The returns are dependent in the market outlook which can be
Optimistic Indifferent or Pessimistic sentiments with estimated probabilities
of 0.25, 0.50 and 0.25 respectively.

Returns on A (%) Returns on B (%) Market Returns (%)

Billion Market 20 15 10
Plant Market 15 18 15
Bonus Market 10 20 20

Required:
(i) Assets A , B and Market expenses returns
(ii) Assets A, B and Market expected standard deviation returns
(iii) Assets A, B and Market expected coefficient of variation or returns
(iv) Portfolio returns
(v) Market beta [10 marks]

(b) Insurance contracts are usually unique and distinct from other types of
contracts. Do you agree with this sentiments? Elaborate. [10 marks]
(c) For government organizations, insurance management is irrelevant”. Do you
agree with this statement?”. Discuss. [10 marks]

QUESTION TWO [15 MARKS]

(a) “Risk Management is a process and not an event”. Do you agree with this
assertion? Explain. [5 marks]
(b) Discuss the main reasons of Re-insurance [4 marks]
 (c) Explain the main implications of risk management to a modern business
entity. [3 marks]
(d) Discuss the unique functions of Insurance Contracts. [3 marks]

QUESTION THREE [15 MARKS]

Write implementation notes on the following concepts uses in insurance risk
management.
(a) Insurance premium [2 marks]
(b) The risk management process [2 marks]
(c) Types of hazards [2 marks]
(d) Principles of risk management [3 marks]
(e) Classification of risk [3 marks]
(f) Legal doctrines that support “the principle of utmost good faith”.

QUESTION FOUR [15 MARKS]

(a) Discuss the role played by Insurance Regulatory Authority [IRA]. [4 marks]
(b) Insurance has played a major role in Kenyas Economy. Highlight the Socio
Economic roles of Insurance in Kenya. [4 marks]
(c) Explain four principles of Insurance. [4 marks]
(d) Explain the role of actuaries , Loss adjusters/ underwriters in insurance.
[3 marks]