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Assaf, S A-E (1982) A systematic approach to the selection of a risk retention level for construction insurance, Unpublished PhD Thesis, , University of Illinois at Urbana-Champaign.
- Type: Thesis
- Keywords: insurance; forecasting; inflation
- ISBN/ISSN:
- URL: https://www.proquest.com/docview/303221681
- Abstract:
This thesis presents a systematic approach for selecting the appropriate deductible level for construction insurance. A consistent criterion is developed for each alternative insurance program, ranging from full risk retention (i.e. , no insurance), and various deductible levels (i.e. , partial transfer of risk), to full transfer. An approach is presented for forecasting future losses based on previous loss experience and accounting for discounting of delayed payout of retained risk, taxes, future liabilities of past exposures, administrative costs, changes in environment, company growth and inflation. The criterion also incorporates the financial capacity of the firm to absorb retained risk as a basis for the nonlinear risk aversion of the contractor. An example is given which shows the step-by-step process of arriving at the selected insurance alternative. A computer program is presented which simplifies the calculation presented in the thesis.