Contrast the balance sheet of a property-casualty insurance company with the balance sheet of a commercial...

Contrast the balance sheet of a property-casualty insurance company with the balance sheet of a commercial bank. Explain the balance sheet differences in terms of the differences in the primary functions of the two organizations.

Expert Solution

Property casualty insurance company will be having the balance sheet of a insurance company and most of the receivables of the insurance company would be in the form of premium which are paid by the public and this balance will be representing high amount of cash flows in the form of premium and it will also reflect the the expenditures in the form of claim on these insurance so this companies will not be holding high amount of assets and these are not acting as intermediaries.

whereas, in the case of banking company, banking companies are authorised to act as intermediaries and they will be holding a large amount of deposits in the public and they will be authorised to use this in order to provide the loan so their balance would be reflecting a large number of receivables due to a large number of lending and they are also representing a large number of deposits and high amount of capital expense, so it can be said that both the balance sheet are highly contrasting in nature

Balance sheet of bank is related to the primary function of performing the work of an intermediary whereas Bank of property insurance will be mostly reflecting the work of insurance company who is working as providing insurance for various properties and repaying them on having some loss associated with the property.

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