Risk as a Basic Element of Insurance Cover Image

Ризик као основни елемент осигурања
Risk as a Basic Element of Insurance

Author(s): Vladimir Ž. Čolović
Subject(s): Law, Constitution, Jurisprudence
Published by: Правни факултет Универзитета у Источном Сарајеву
Keywords: Risk; Insurance;Risk management;Control;Prevention;Damage;Coinsurance;
Summary/Abstract: The risk is one of the basic elements of insurance and insurance is a protection against the realization of risk. The realization of the risk depends, primarily, on its nature. The risk can be multiplied, making it harder to control. Risk control and possibility to influence its realization is one of the most complex operations, not just for insurance companies but also for all subjects in society. The risk always threatens, no matter what it consists of and when and where it can be realized. We must study the risk, primarily, from the aspect of the insurer, whose main activity involves covering risks but also, we have to observe and protect against risk in terms of enterprises, legal persons and individuals in general. This article deals with control of risk and risk management in the insurance companies, as well as other legal entities, who seek protection from risks, primarily in insurance companies, but who, nevertheless, must define other models of protection as well. The main methods of protection against the risk in insurance company are coinsurance, reinsurance and transfer of insurance port-folio to the other insurance company. When we talk about the insured, the main methods of protection against risk are damage control method, the method of financing the damage and the method of internal risk reduction. The author also pays attention to the changes in EU legislation, when it comes to risk control and operation of insurance companies in the countries of Western Balkans which are not EU members. Impact of EU law in this area will occur in countries of Western Balkan, primarily due to: a) a possible acceptance and implementation of these rules, b) the preparation for EU membership, c) reinsurance and d) insurance companies owned by the owners from EU countries. The conclusion of this paper refers to the fact that the risk can be controlled and that the protection does not consist only of insurance or of coinsurance and reinsurance, but also of preventing, or taking action to reduce risks.