Casualty Actuarial Society (CAS) Practice Exam

What are the four COPE elements?

1. Construction, occupancy, protection, and external exposure

2. Cost, occupancy, process, and external exposure

3. Construction, occupancy, process, and earnings

4. Construction, organization, protection, and external factors

The correct answer is: Construction, occupancy, protection, and external exposure

The four COPE elements—Construction, Occupancy, Protection, and External Exposure—are vital in assessing risk in property insurance. The term COPE is commonly used by underwriters to evaluate the characteristics of a building or property that can influence the likelihood and severity of potential insurance claims. Construction refers to the materials and methods used to build a property, which can impact how well it withstands hazards such as fire or severe weather. Occupancy considers the use of the property, as different uses carry different risks (for instance, a warehouse versus a residential building). Protection involves the measures in place to safeguard against loss, such as fire alarms, sprinkler systems, and security measures. Finally, External Exposure pertains to risks that come from outside the property, such as proximity to hazardous materials or crime rates in the surrounding area. Understanding these four elements is crucial for actuaries and underwriters to accurately assess the risk profile of a property, set premiums appropriately, and make informed decisions on coverage.