Question

In: Accounting

Give some examples of specific securities that would be more likely found on the asset side...

Give some examples of specific securities that would be more likely found on the asset side of a balance sheet of a life insurance company and those that would be more likely found on the asset side of the balance sheet of a property and casualty company.

What is the reason that all U.S. states have insurance commissions? What do such commissions do?

Solutions

Expert Solution

A Life insurance company would keep in mind the varied invenstment purpose that an investor would expect to meet and hence the insurance company would like to have yield oriented securities on their assets side. The returns from such securities should be fixed and able to pay off the insurer as well as show some returns to the owners after paying off the insurers and the operation costs. Hence taxable securities which are medium to long terms and fixed interest/fixed return based would find its place on the assets side.

However for property and casualty company would invest more on the tax exempt bonds and would show up on the assets side of the balance sheet.

Insuance companies have their own share of plus and negativies and managed by people who might not be fair. Hence we have insurance commissions in all the US States. In US they follow state based insurance regulatory system and each state regulate their own insurance markets based on the need of time

What they do is maintain a fair price for insurance products, so that they are not overpriced and as well as look into the solvency of the insurance companies, since it should not be the case that millions of citizens buy an insurance product from a particular insurer and the same goes into insolvency. Hence Insurance commissions play the role of a regulatory body in matters of insurance and look into unfair practices of insurance organisaions and as well as ensuring adequate insurance coverage.


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