Property and Casualty Insurance Companies

The investment policies of these companies are affected by two basic facts. First, because they are subject to federal income taxes (unlike life insurance companies), the largest share of their assets is held in tax-exempt municipal bonds. Second, because property losses are more uncertain that the death rate in a population, they are less able to predict how much they will have to pay policyholders than are life insurance companies. Therefore, property and casualty insurance companies hold more liquid assets than life insurance companies; municipal bonds and US government securities amount to over half their assets and most of the remainder are held in corporate bonds and corporate stock.

Property and casualty insurance companies will insure against losses from almost any type of event, including fire, theft, negligence, malpractice, earthquakes, automobile accidents, and so on. If a possible loss being insured is too large for any one firm, several firms will frequently join together to write a policy in order to share the risk. The most famous risk-sharing operation is Lloyd’s of London, an association in which different insurance companies can insure a fraction of an insurance policy. Lloyd’s of London has claimed that it will insure against any contingency - for a price.

1. Answer the questions:

1. How would you distinguish between insurance and assurance?

2. What is premium?

3. What events can ruin us?

4. How does the insurance company make its profit?

5. What are the differences between life insurance companies and property and casualty insurance companies?

6. What are the assets of life insurance companies? What assets are liquid? What assets are risky?

7. Which type of policy is more profitable to a company: a permanent or a term one?

8. What do the property and casualty insurance companies insure?

2. Match each of the words on the left with the correct explanation on the right:

policy	freedom from payment of taxes
installment	a life insurance policy by which the sum insured is payable at the end of a fixed period or on the earlier death of the person insured
premium (n.)	money or property given upon trust so as to produce a regular and permanent income
claim adjustment	a contract by which the insurer, in return for a payment binds himself to pay the named person a certain sum of money
to incapacitate	of specially good quality and therefore sold at a higher price
premium (adj.)	to deprive of natural capacity
commissioner	the money paid by the insured to the insurers in return for insurance covers
endowment	one of a series of regular payments
exemption	the settlement of demands
contingency	an uncertain and unwelcome event
endowment policy	an official appointed by the state