A Systematic Approach to the Selection of A Risk Retention Level for Construction Insurance
Assaf, Sadi Abd-Elafo
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https://hdl.handle.net/2142/69902
Description
Title
A Systematic Approach to the Selection of A Risk Retention Level for Construction Insurance
Author(s)
Assaf, Sadi Abd-Elafo
Issue Date
1982
Department of Study
Civil Engineering
Discipline
Civil Engineering
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Business Administration, General
Engineering, Civil
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.
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