Horizon Aerospace Manufacturing is evaluating its exposure to liability claims stemming from its testing of experimental jet propellants. The company's risk management committee implements the following four directives:
1. The development of solid-state propellants is completely halted due to the unquantifiable risk of spontaneous combustion.
2. For liquid propellants, the facility installs automated chemical suppression systems and reinforced blast walls.
3. The company establishes a funded captive subsidiary to strictly cover the first $5 million of any resulting liability claim.
4. All third-party testing contractors are required to sign hold-harmless agreements naming Horizon as an indemnified party.
Based on the STARR framework of risk management, which of the following statements correctly classify the risk handling methods utilized by Horizon Aerospace? (Select all that apply)
- Establishing the funded captive subsidiary to cover the first $5 million of liability claims represents an active form of risk retention.Answer
- Requiring third-party contractors to sign hold-harmless agreements represents a non-insurance method of risk transfer.Answer
- CInstalling the automated chemical suppression systems and reinforced blast walls represents risk avoidance, as it neutralizes the hazard of a catastrophic explosion.
- DHalting the development of solid-state propellants represents risk reduction, because it decreases the frequency of potential liability claims across the company's entire product line.