Loss provisioning is intended to cover:

Loss provisioning is intended to cover:
A . Unexpected losses
B . Losses in excessof unexpected losses
C . Both expected and unexpected losses
D . Expected losses

View Answer

Answer: D

Explanation:

Loss provisioning is intended to cover expected losses. Economic capital is expected to cover unexpected losses. No capital or provisions are set aside for losses in excess of unexpected losses, which will ultimately be borne by equity. Choice ‘d’ is the correct answer.