Elements Of Risk Management Practice Test

Which term is primarily concerned with shifting liability for paying a loss before it occurs?

Waiver of Subrogation Subrogation Release Transfer of Financial Responsibility External Funding

Correct Answer:

Transfer of Financial Responsibility

Explanation:

Shifting liability for paying a loss before it occurs is about transferring the financial responsibility for those losses to another party through an agreement ahead of time. This is best described by Transfer of Financial Responsibility, which explicitly conveys that one party accepts the costs of specified risks before any incident happens. The other terms focus on post-loss actions or funding: waiver of subrogation and subrogation release limit or end the insurer’s right to seek recovery after a loss, while external funding refers to obtaining money from outside sources to cover losses, which may occur after the event but doesn’t define an upfront transfer of responsibility.

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