Risk Identification and Retention
There are two types of Risk, Business Risk and Pure Risk. Business Risk includes the inherent chance for profit while pure risk involves no chance for profit, only a chance for loss.
Pure Risk are insurable, Business Risk are not.
Insurable Risk fall into 3 categories, Property, Liability, and Employee. Property includes the destruction of property caused by specified perils, (such as fire, including the extra expenses, (soft costs), associated with interruption), liability which includes personal injury or property damage to a 3rd party, and personnel which covers employee related risks.
Under a guaranteed cost rating plan, program pricing is based largely on a client companies projected losses for the period, (loss pick), and the insurance companies general operating and overhead expenses.
Risk retention and financing plans involve the whole or partial assumption of the risk of loss. By implementing a solid risk management program, safety and risk transfer techniques, contractors can assume higher retention limits and reduce their direct cost of insurance.