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Course Description
Floods, theft, employee injuries, recession-driven sales collapses, borrowers who fail to pay off their obligations—what is a firm to do about these and sundry other threats it faces? This question is addressed by the field of risk management. Possible answers include reducing risky activities, taking precautions to improve the outcomes of those activities, acquiring insurance, entering derivatives positions, and more. FIN 454 will examine these alternatives with an emphasis on insurance. We will consider inherent challenges in the sharing of risk (e.g., moral hazard), discuss the legal and regulatory framework within which the insurance market operates, and learn about specific types of insurance from life and health to commercial liability. While much of the course will be viewed from the perspective of general businesses managing their risks, we will also consider the management of insurance firms themselves.

Learning Outcomes (not comprehensive) 1. Identify various risks and quantify risk 2. Understand insurance company operation and regulation 3. Know motivations for insurance and factors constraining insurability of risk 4. Know the characteristics of different types of insurance policies and employee benefit plans 5. Understand and evaluate various types of risk management (e.g., loss control, insurance, alternative risk transfer)

Each of these outcomes will be assessed through homework and exams as described below.

Course Prerequisite: FIN 341. The textbook is written to accommodate those without prior finance experience, but some of the supplemental material I will employ assumes basic knowledge of finance, and you will also draw on experience gained in the ACCT, MATH, DSCI, and MIS courses that are prerequisites for FIN 341. Moreover, we will cover portions of the early textbook chapters somewhat rapidly because of my expectation that the content will largely be familiar to you.

Required Materials * Risk Management and Insurance, Second Edition, by Harrington and Niehaus * Provident Life and Accident Insurance: The Acquisition of Paul Revere, Harvard Business Product # 202044-PDF-ENG. Accessible at https://cb.hbsp.harvard.edu/cbmp/access/19039837 * Other materials (newspaper articles, etc.) distributed in class or posted on Blackboard if I tell you they are required

Course Website I will often make announcements on this course’s Blackboard website. Suggested textbook problems and other items will also be posted. I suggest checking this site each day or at least a few times each week. If you fail to do so, you may miss corrections to assignments, etc., and I will not generally excuse errors that result. Also, please be sure that the email account on Blackboard is one that you check frequently, as I may send out time-sensitive information using Blackboard’s email feature.

Evaluation
Your score will be based on the following:
Midterm 1: 105 points
Midterm 2: 105 points
Final Exam: 130 points
Homework: 60 points

If your percentage of this total is at least your grade will be at least
91% A
89% A-
86% B+
81% B
78% B-
75% C+
69% C
65% C-
62% D+
58% D
55% D-

I typically add some extra points to exam scores based on their difficulty; this scale would then apply after those adjustments.

Exams
Exams will address the lectures and assigned reading. The tests likely will include multiple choice and short answer questions as well as numerical problems and perhaps other tasks. Before you hand in your test, verify that you have answered all of the questions. You will not be allowed to do additional work once you have submitted your exam. There should be sufficient time to finish, but if not, you must stop writing when the class is told to stop—do not finish your sentence or your calculation. I’ll deduct 4 points for any writing after time has been called, with an additional 5 point deduction for every additional 30-second period you write.
The final exam will be essentially comprehensive, but it will emphasize (with approximately 85% weight) material covered after the midterm. Exams will be closed book, but I probably will allow you a 4”x6” card with your handwritten notes on both sides for the final exam only. Special Accommodations: If you have a disability and require special arrangements, please contact disAbility Resources for Students, 650-3083.

Homework
The homework will include two assignments related to the Harvard case study, a brief presentation on a historical disaster (and the related risk management successes or failings), and also some end-of-chapter questions from the textbook. The textbook questions will be announced a couple of weeks in advance of the corresponding due dates. Homework is due at the beginning of class on the dates indicated in the syllabus unless I announce changes to those due dates. Homework that is received after 12:35 p.m. on the due date will normally receive only half the credit that it otherwise would earn, and submissions that are more than a week late or after the final exam will receive zero credit. Owing to the large number of students this quarter, the presentation will be done in groups of three. You may do your written homework alone or in groups of two or three. (Groups are encouraged from a “minimize my grading effort” standpoint.) You are not required to work with the same group for the entire quarter. Groups should submit a single copy of their homework with the names of all group members. Groups should not work together with other groups. Likewise, assistance from students who previously took the course or from online homework sites is not acceptable. Appendix D of the WWU catalog, http://catalog.wwu.edu/content.php?catoid=7&navoid=1014 , describes the university’s academic honesty policy. Feel free to ask me for assistance on homework. For all homework assignments, I want hard copies. For each of the Provident case study assignments, I want an electronic copy posted to the Blackboard assignments page in addition to the hard copy. I will provide details on other assignments later.
Doing the required homework alone will not adequately prepare you for our exams. I suggest that you look at the “Concept Check” questions (the answers to which appear at the end of the chapter) and end-of-chapter questions for the chapters we cover. I will post solutions to a subset of those questions. For the others, I am happy to discuss answers in my office with those who are interested. Also, I will post a few practice problems I have created along with portions of previous exams.

Alterations to Syllabus In the event that some policy presented here is changed, I intend to announce the change in class, on the website, or via email. Typically, I use more than one of those channels.

Rough Schedule
The following schedule is subject to change. The final exam date is definite, excepting the possibility of a well-timed earthquake or other calamity.