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In: Computer Science

describe some key elements concerning insurance company investments

describe some key elements concerning insurance company investments

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Expert Solution

Q describe some key elements concerning insurance company investments.

Ans: Firstly , let's take an overview of the business model of the Insurance companies .Based on the business model the insurance investments company assuming and diversifying risk.The essential insurance model are involved in polling the risk from the individual one and redistributing it across a larger portfolio.

Insurance companies basically invest in many areas, but the most of them are investment in bonds.This makes the better sense because the bonds are the safest of all investment categories. As we know that the Insurance companies are being in the the business of risk assessment , that would be the low risk from this.The Insurance companies are mostly tends to invest in the bonds but, they should also invest in the stocks,liquid short-term and mortgages investments.

The Life insurance companies categorized their ’ investment , that are the linked investments, non-linked investments and shareholders’ investments.The points that the insurance company investments should insure are :

  • Safety: The Security of capital should be the  prime consideration for insurance companies for making their investment this is because they have the responsibility to pay claim as and when arises.Thus the security of the capital is the important factor.
  • Profitability:To run the insurance companies the companies has depend on the solvent basis and it also important that how they are invested their fund.To make the adequate amount of return ,the  stability and regularity of return are also essential.
  • Liquidity: The Liquidity basically represents how to convert the cash without undue loss of capital.This principal is very crucial because it has to fill the money for the payment of claims.
  • Diversification: Diversification of the investment simply means that to spread the investment over the different channels.The Insurance investment assets are broaden in the different directions:  

(a) According to the different geographical distribution (location).

(b) According to the economic enterprises of the country,time and political changes.

(c) According to the number of investments in a security, maturity of security and duration of security.

  • Increasing of Life Business: Investment are basically ought in that segments which are going to profit business in the return.As we know that it obvious that the social objective principle that aids in expanding the business.

By following the above points the insurance company boost their investments.With the proper rules and regulations the company make a better growth in it's overall aspects.

THANKS , i think this will give you a better intuition about your question. If you have any doubt feel free to ask in the comment section.


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