{"id":8504,"date":"2022-06-01T14:40:09","date_gmt":"2022-06-01T19:40:09","guid":{"rendered":"https:\/\/www.bbrown.com\/insight\/loss-dependence-a-portfolio-level-view-of-retained-exposures\/"},"modified":"2022-06-01T14:40:09","modified_gmt":"2022-06-01T19:40:09","slug":"loss-dependence-a-portfolio-level-view-of-retained-exposures","status":"publish","type":"insight","link":"https:\/\/www.bbrown.com\/ca\/insight\/loss-dependence-a-portfolio-level-view-of-retained-exposures\/","title":{"rendered":"Loss Dependence | A Portfolio Level View of Retained Exposures"},"content":{"rendered":"<div class=\"wpb-content-wrapper\"><p>[vc_row row_style=&#8221;page-hero&#8221; full_width=&#8221;stretch_row_content&#8221;][vc_column]\n\t<div class=\"hero hero--wrap    \">\n\n\t\t<div class=\"hero--background-image hero--background-image-blur\">\n\t\t\t<div class=\"hero--overlay\"><\/div>\n\t\t\t\t\t\t\t<div class=\"hero-background\" style=\"background: url(https:\/\/www.bbrown.com\/wp-content\/uploads\/2022\/06\/WP-AlternativeFinancing2_WebsiteGraphic.jpg) center center no-repeat; background-size: cover;\"><\/div>\n\t\t\t\t\t<\/div>\n\n\t\t<div class=\"hero--container\">\n\t\t\t<div class=\"container\">\n\t\t\t\t<div class=\"hero--inner width-100\">\n\n\t\t\t\t\t\n  <div class='content-heading  100%  '>\n    <p class='text-white subheading'>White Paper<\/p>\n    <h1 class='text-white    '>\n      Loss Dependence | A Portfolio Level View of Retained Exposures\n    <\/h1>\n\t\n  <\/div>\t\t\t\t\t\n\t\t\t\t\t\n\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\n\t<\/div>\n\n\t\n[\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;2\/3&#8243;]\n  <div class='content-heading  100% content-heading--ruled '>\n    \n    <h1 class='text-brand-dark-blue    h2'>\n      Loss Dependence | A Portfolio Level View of Retained Exposures\n    <\/h1>\n\t\n  <\/div>[vc_column_text]<strong>This is the second white paper in this series. If you missed the first paper, you can download a copy <a href=\"https:\/\/www.bbrown.com\/wp-content\/uploads\/2022\/06\/White-Paper-\u2013-Alternative-Financing-1-of-3-\u2013-Brown-Brown.pdf\" target=\"_blank\" rel=\"noopener\">here<\/a>. To demonstrate the importance of dependence between risks, we once again utilize a highly simplified corporate case study.<\/strong><\/p>\n<ul>\n<li><strong>White Paper 1: Beyond Expected Value \u2013 Considering Volatility<\/strong><\/li>\n<li><strong>White Paper 2: Loss Dependence \u2013 A Portfolio Level View of Retained Exposure<\/strong><\/li>\n<li><strong>White Paper 3: Corporate Risk Appetite and Program Structuring<\/strong><\/li>\n<\/ul>\n<h3>Market Pricing<\/h3>\n<p>In our first paper, we reviewed how expected value is inadequate as a standalone measure of risk, and we made the case that loss volatility should also impact risk financing decisions. In the following example, we examine how correlations among risks may impact the overall volatility of an entity\u2019s retained loss exposure.<\/p>\n<p>Large risk bearing organizations are typically concerned with more than one potential cause of loss or line of insurance coverage; however, we frequently see individual exposures considered in isolation with minimal regard for how correlation may impact the overall corporate risk profile. The simplified case below illustrates the impact that the consideration of dependence may have on a risk financing decision making process.<\/p>\n<p>Company ABC is assessing the risk associated with two exposures: Risk X and Risk Y. Risk X is larger than Risk Y in expected value terms, but Risk Y possesses a proportionally larger amount of volatility.[\/vc_column_text]\t<div class='wpb_content_element text-left btn-container'>\n\t\t\t\t\t<a class='btn btn-brand-green  '\n\t\t\t\thref='https:\/\/www.bbrown.com\/wp-content\/uploads\/2022\/06\/White-Paper-\u2013-Alternative-Financing-2-of-3-\u2013-Brown-Brown-1.pdf' target='_blank' data-toggle=''>\n\t\t\t\t<span class=\"btn-text-color--default\">Continue Reading<\/span>\n\t\t\t<\/a>\n\t\t\t<\/div>\n[\/vc_column][vc_column width=&#8221;1\/3&#8243;][vc_single_image image=&#8221;1871&#8243; alignment=&#8221;center&#8221; style=&#8221;vc_box_circle_2&#8243;][vc_column_text]<\/p>\n<h6 style=\"text-align: center;\">Jason Flaxbeard<\/h6>\n<p style=\"text-align: center;\">Alternative Risk Leader<\/p>\n<p>[\/vc_column_text][vc_separator border_width=&#8221;2&#8243; el_width=&#8221;60&#8243;][vc_single_image image=&#8221;1872&#8243; alignment=&#8221;center&#8221; style=&#8221;vc_box_circle_2&#8243;][vc_column_text]<\/p>\n<h6 style=\"text-align: center;\">Andrew Golub<\/h6>\n<p style=\"text-align: center;\">Chief Innovation and Analytics Officer<\/p>\n<p>[\/vc_column_text][vc_separator border_width=&#8221;2&#8243; el_width=&#8221;60&#8243;][vc_single_image image=&#8221;1873&#8243; alignment=&#8221;center&#8221; style=&#8221;vc_box_circle_2&#8243;][vc_column_text]<\/p>\n<h6 style=\"text-align: center;\">Scott Hornyak<\/h6>\n<p style=\"text-align: center;\">Chief Actuary<\/p>\n<p>[\/vc_column_text][vc_separator border_width=&#8221;2&#8243; el_width=&#8221;60&#8243;]\t<div class='wpb_content_element text-center btn-container'>\n\t\t\t\t\t<a class='btn btn-brand-dark-blue  '\n\t\t\t\thref='\/us\/contact\/contact-general\/' target='' data-toggle=''>\n\t\t\t\t<span class=\"btn-text-color--default\">Connect Now<\/span>\n\t\t\t<\/a>\n\t\t\t<\/div>\n[\/vc_column][\/vc_row]<\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>[vc_row row_style=&#8221;page-hero&#8221; full_width=&#8221;stretch_row_content&#8221;][vc_column][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;2\/3&#8243;][vc_column_text]This is the second white paper in this series. If you missed the first paper, you can download a copy here. To demonstrate the importance of dependence [&hellip;]<\/p>\n","protected":false},"author":66,"featured_media":8464,"template":"","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"insight_category":[34],"class_list":["post-8504","insight","type-insight","status-publish","has-post-thumbnail","hentry","insight_category-property-casualty"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.0 (Yoast SEO v27.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Loss Dependence | A Portfolio Level View of Retained Exposures - Brown &amp; Brown<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bbrown.com\/ca\/insight\/loss-dependence-a-portfolio-level-view-of-retained-exposures\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Loss Dependence | A Portfolio Level View of Retained Exposures\" \/>\n<meta property=\"og:description\" content=\"[vc_row row_style=&#8221;page-hero&#8221; full_width=&#8221;stretch_row_content&#8221;][vc_column][\/vc_column][\/vc_row][vc_row][vc_column width=&#8221;2\/3&#8243;][vc_column_text]This is the second white paper in this series. If you missed the first paper, you can download a copy here. 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