Which of the following is NOT a method of managing risk?

• A. Avoidance
• B. Transfer
• C. Sharing
• D. Hedging

Answer: (D)

In this context, risk management for insurable exposures is typically about reducing or shifting the chance or impact of losses: you avoid the activity that creates the risk, you transfer the risk to another party (usually through insurance), or you share the risk among multiple parties (such as through risk pools or reinsurance). Hedging, on the other hand, uses financial instruments like derivatives to offset potential losses from market movements. While hedging is a legitimate risk management tool in finance, it isn’t a standard method for managing casualty insurance risk. It doesn’t reduce the probability or severity of an insured loss in the way avoidance, transfer, or sharing do, but rather aims to offset financial exposure through market positions. Therefore, hedging is the method that doesn’t fit the typical risk management approaches used in casualty insurance.