Question

True or False If false, provide a brief explanation of why 5. Property and Liability insurance company investments tend to be of longer duration than do life insurance company investments 6. Employment opportunities in the insurance industry are narrow and limited 7. The major assets of an insurance company are inventories of blank policy applications 8. If an insurance company is using facultative reinsurance, it must look for a reinsurer each time the company used reinsurance 9. A Property and Liability premium can be described as earned when it is paid to the insurance company 10. The two major sources of revenue for an insurance company are premiums and investment income 11. Policy reserves are considered an asset of the insurance company 12. Insurance is regulated primarily at the state level 3

Answer 1

1.True

2. True

3. False.

Insurance companies, by their very nature, accumulate substantial amounts of cash that are used to purchase invested assets. Assets accumulated by insurers include those associated with the company’s policyholders’ surplus (or capital), as well as assets that support the insurance company’s policy reserves, which are used to pay policyholder obligations as they become due.

The nature and size of an insurer’s invested assets vary substantially depending on the specifics of the insurer. Life insurance companies typically accumulate the largest dollar amount of invested assets, because of the “asset intensive” nature of their products, such as life insurance and annuities. Assets of life insurers are primarily invested in medium- and longer-term taxable fixed-income investments. Property/casualty insurers typically have a relatively higher percentage of their assets associated with the company’s policyholders’ surplus (capital) — a considerably smaller dollar amount of total assets than life insurers — and can benefit from use of tax-favored investments such as tax-exempt bonds. Still other kinds of insurance companies (such as reinsurers, title insurance companies and health insurers) have their own set of unique investment-related characteristics and needs. The investment portfolio of every insurer must be tailored to satisfy that specific insurer’s complex and ever-changing investment requirements.

4. True.

5. True

6. True

7. False. Policy Reserve are considered as liability of a insurance company.

8. False. Insurance is primarily regulate in the national level.