Fund life & health insurance Explain carefully why this statement is true. Risk capital can assume...

Fund life & health insurance

Explain carefully why this statement is true.

Risk capital can assume more risk than the reserve capital.

Expert Solution

Risk capital can assume more risk than Reserve capital because Reserve capital have various limitations regarding their use and they are primary belonging to the same holders of the company and there are various types of Reserve capital like specific reserve which are only used for that specific purpose and they cannot be used for general purposes. Specific reserve will include reserve for foreign fluctuations exposures which can only be used for that particular purpose.

Hence, risk capital can be used for taking higher risk and appropriate risk according to the need and desire of the company which is not having any kind of claim by other shareholders and they can be used for the general purposes of the company.

jeff jeffy answered 2 years ago

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