The cost-of-risk (“COR”) concept was developed in 1962 and today is defined as the sum total of all risk management costs that apply to three exposures: property, tort liability and occupational disease or injury. Within these three exposures are six types of costs: insurance premiums; retained losses; internal administration; outside services; financial guarantees; and fees, taxes and other similar expenses.
The COR is then expressed as a dollar amount per $1,000 of revenue. Using this as a standard means of comparison, an organization can track its COR from year to year and be able to measure itself against others within its industry.
Pinnacle can assist you in developing your COR and compare it to your peer group based on SIC, as published in the most recent RIMS Benchmark Survey. RIMS expresses COR as a dollar amount per $1,000 of revenue. Therefore, our peer comparison will use revenue as a standard variable.
A COR determination will allow you to better track and trend your cost year-over-year and allow for a more reliable forecast in connection with a variable, such as revenue.