Most insurance companies are a high risk group, one of the types of risk management practices. Under this system, insurance companies, and the spirit of the concept of term insurance is similar to that used to describe the distribution of risks, etc., flood, earthquake, as the insurance company that can provide protection against the risk of loss, a pool, join to form. They are forced to work in risk pooling insurance risks actually not pooled. In particular, it provides a subsidy to encourage participation in the absence of a voluntary pool risk insurance contrast solid support. [1]
Managing the supply chain is an important concept of risk sharing. [2] is one of the requirements of the distribution of risks across different locations is collected, because the demand for aggregate demand through space suggests that the variability is reduced, it is one of the great demand customer is likely to be offset by other low demand. This variability can be reduced by reducing safety stock and average inventory is reduced.
For example: centralized distribution system, the warehouse to reduce variability as the standard deviation or coefficient of variation, which leads to all customers that works.
Risk pooling three critical points:
The benefits of risk pooling is directly dependent on market behavior. We compare the two markets and market demand is more or less than the average demand, we are positive about the market demand, if say, This is explained as follows. The positive correlation between market demands, since the benefits of pooling risk decreases.
(Government)
Are public entities such as government agencies, except that it is for the Intergovernmental Risk Pool (IRP), which operates under the same general principles. Therefore, they have agreed to share IRP is the cost of the risk of losses and contributions (premiums) are signed with its members, alternative risk financing and payment transfer process. In other words, the Intergovernmental Risk Pool A exposure, the risk of liability or to finance public entities joined in a cooperative group.
Intergovernmental Risk Pool, which may include, however, the authorities, the joint powers authority, association, organization, trust, and over the hedge fund is limited.
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