Depending on the source of the risk of loss may also have different characteristics. These characteristics are associated with loss of funding by way of its risks. Performance losses are frequency (frequency of losses) and severity (severity of losses - size) losses , and the ability to delay the detection of risk and payment on it.
Concept establishes a relationship between the frequency and size of losses shown in the illustration can be applied to all types of losses faced by the company, not only to losses from the risks of danger (accident). For example, production costs can rise to varying degrees, or reduced for a certain period of time.
The increase in the cost of production creates a loss for the company, because it spends more money than usual on the same resources. Similarly, the reduction in production costs increases profit organization. The concept of frequency and size of the losses of the organization is also applicable to other types of losses related to business risk and reputation risk.
For certain types of risks of danger, especially for those that are associated with the risk of liability, may be a substantial delay between when the loss occurred, n the moment when it was detected and compensated. Next will be discussed, as this property losses leads to the conclusion that a plan of financing risks.
Losses occurring due to the risks associated with the liability usually have great grace period between when the losses actually came, were discovered and covered (written off). In the event of loss related to property, such a delay does not normally arise. The illustration shows a typical connection between the coating (written down) and incurred losses occurring within one year of the risks of liability and reserves to cover losses.
Note that over time the total amount to offset losses in one year increases. General losses occurred also increased. Within a few years after the onset of the year losses for all losses paid and the total paid losses are equal to the total losses incurred.
