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1 De nition and application A Risk is de ned as the possibility of loss The de nition of risk refers to the possibility, not the probability, of loss It does not suggest an element of measurability There are different classi cations of risk: (1) Financial and non nancial risk Risk may involve nancial loss in some cases; in other cases, there is no nancial loss Insurance is concerned with those risks that involve a nancial loss (2) Static and dynamic risk Dynamic risks are those resulting from changes in the economy Changes in price level, consumer tastes, income and output, and technology may cause nancial loss to members of the economy Static risks involve those losses that would occur even if there were no changes in the economy, such as the perils of nature and the dishonesty of other individuals Static risks are more suited to treatment of insurance than are dynamic risks (3) Fundamental and particular risks Fundamental risks involve group risks, caused by conditions more or less beyond the control of the individuals who suffer the losses These risks are the responsibility of society rather than the individual, such as unemployment and occupational disability Particular risks involve losses that arise out of individual events and are felt by individuals rather than by an entire group Particular risks are more appropriate for insurance than fundamental risks (4) Pure and speculative risks Pure risk is used to designate those situations that involve only the chance of loss or no loss Speculative risk describes situations in which there is a possibility of loss, but also a possibility of gain Gambling is an example of a speculative risk Only pure risks are generally insurable B There are different elements for determining an insurable risk: (1) The risk of loss must be de nable and measurable (2) There must be a large enough number of similar exposure units to make potential losses somewhat predictable (3) A potential loss must be fortuitous or accidental (4) The loss must not be catastrophic C Peril is a cause of a loss Examples of perils are re, windstorm, hail, and theft Each of these is a cause of a loss that occurs D Hazard is a condition that may create or increase the chance of a loss arising from a given peril It is possible for something to be both a peril and a hazard Hazards are normally classi ed in three categories: (1) Physical hazards consist of those physical properties that increase the chance of loss from the various perils Examples of physical hazards that increase the possibility of loss from a peril of re are the type of construction and the location of a property (2) Moral hazard refers to the increase in the probability of loss that results from the dishonest tendencies of an insured in an attempt to defraud an insurance company (3) Morale hazard results from the careless attitude of an insured person toward the occurrence of losses The purchase of insurance may create a morale hazard, inasmuch as the realization that the insurance company will bear a loss may lead the insured to exercise less care than if forced to bear the loss alone.



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Application logic is often called "business logic" because it relates to the core business goals of an application For example, an application server might contain logic to calculate the total value of a user's electronic shopping cart Or it might provide automatic membership approval for a credit card Other kinds of application logic are more subtle or indirectly executed For example, an application server may contain logic that determines a list of books or CDs that best fit a user profile These items might then be displayed on the side of an application screen to entice the user during her session Recall that, at a bare minimum, a Web application consists of a client and a server separated by a network It's no surprise, then, that these are our main choices for where to deploy business logic So-called "fat client" solutions, such as Java applet-based applications, can package the logic inside the client itself This is often a good choice if your application is heavily CPU bound, works with many local files and resources, or requires some kind of local security Since Java applets can be rebuilt when necessary, there's no loss of control over the application However, fat clients are generally unpopular because most Web applications are actually I/O bound, either reading and writing data to a remote database or sitting idle waiting for user requests Fat clients can also require long downloading times, making the application seem bulky Also, although Java itself is portable, not everyone has it let alone the latest version so the assumption that applets will run anywhere doesn't always hold up Furthermore, packaging logic in an applet typically means that some sort of host application (like a browser) is required to launch Java for logic execution This means that such designs are less flexible and less amenable to more general application integration needs, making the logic available only to the interactive end user For example, B2Bstyle integrated applications connected via a fat client may not be possible the client is always remotely accessing business logic and can't interact with an applet or anything other than a remote resource over a network In short, fat clients have their place in Web-based applications, but they tend to be the exception for now Instead, most Web applications rely on a thin client approach In contrast to fat clients, thin clients position logic squarely on the server side, in either the application server or the database Making the logic available on the server side as a generic set of functionality accessible through multiple interfaces makes it usable not only by interactive Web clients but also by other integrating applications and technologies One of the nicest things about server-side application logic is that clients can pick and choose the functionality they want without being forced to deal with application baggage they don't need There are some disadvantages to server-side application logic The primary one is that resources such as CPU and memory can quickly become exhausted With server-side application logic, a provider is effectively supplying computing power to the hundreds, thousands, and perhaps millions of clients that use its application Thus, it faces the very scalability and performance challenges that are the subject of this book To scale effectively and perform consistently, a.





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