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[Music] hi welcome this is dr. Khan and this is chapter 4 on pulley arrangement and diversification of risk do you know what is risk pooling risk pooling is essential to the concept of insurance a risk pool is one of the forms of risk management commonly practiced by insurance company under the system insurance company to come together to form of pool which can provide protection to insurance companies against catastrophic risk or in other words their sharing risk for example health insurance everyone would pool their resources together before anyone for ills so when somebody felt you the pair is going to be paid from the port landing collected earlier so lets learn more about pooling arrangement in this chapter we shall look at how putting of independent loss exposures reduces risk how correlation in losses affects the amount of risk that is reduced in pooling arrangement how pooling arrangement provide the foundation for insurance transactions and how insurance are efficient manager