Instructions – PLEASE READ THEM CAREFULLY

• The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
• Assignments submitted through email will not be accepted.
• Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
• Students must mention question number clearly in their answer.
• Late submission will NOT be accepted.
• Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
• All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).
• Submissions without this cover page will NOT be accepted.

Assignment Question(s):(5 Marks)

Q1. Insurance companies invest in many areas, but most of all they invest in bonds. This makes sense because bonds are perhaps the safest of all investment categories. Insurance companies – being in the business of risk assessment – would logically find the low risk that bonds represent appealing, but there are other reasons as well. (1.5 Marks)

Questions:

a. How Insurance Companies Make Money?

b. Why Insurance Companies Invest?

c. What Insurance Companies Invest In?

Answer:

Q2. “Reinsurance is considered as a significant process which provides necessary securities to insurer which safeguards them from financial problems that arises from any future unexpected events.” Comment on the statement and explain the meaning and benefits of the term “Reinsurance.” Also read the following statements and identify the relevant reinsurance type/contract for each case. (2 Marks)

• This type of reinsurance is based on the features such as ceding of percentage of risk to the reinsurer and recover of same ceded percentage from reinsurer related with all losses on those risks. Such kinds of contracts are generally used by new companies.
• Under this contract, the pro rata basis is being used to share the premium and losses by the reinsurer and insurer.
• This type of reinsurance is based on the determination of loss ratio as an expression of predetermined limit in which insurer is required to retain all claims during a specified period.
• This refers to retention of insurer on all losses arising from a single occurrence.

Answer:

Q3. What is State Guaranty Fund? What kind of support and tasks it implies? How it accumulates fund? (1.5 Marks)

Answer: