Insurance Company
An insurance company or insurer is the company specializing in Insurance, whose economic activity is to produce the security service, covering certain economic risks (risks insurable) economic units of production and consumption.
Its activity is an operation to accumulate wealth through the contributions of many individuals exposed to adverse economic events, to allocate it thus accumulated the few whom the need arises. Follow the principle of mutuality, seeking solidarity among a group subject to risks.
This mutuality is organized entrepreneurially, creating a heritage that addresses the risks. The unfavorable effect of these risks, taken together, is substantially lessened because, for the insurer, individual risks are balanced: only insured suffer few, compared to the many that help pay for coverage. This allows a statistical risk management, from the economic point of view, but is kept individually from the legal standpoint.
Index
1 Financial activity
2 Characteristics of insurance companies
3 Technical principles
4 Technique and safe insurance
5 The technical provisions and the solvency margin
5.1 The technical
5.2 Solvency margin
6 References
7 See also
Financial activity
The insurance business is one of the three pillars of financial markets, along with the bank credit market and the securities markets or financial instruments. Its strategic importance, social and economic, leads to their being subject to strict administrative supervision with its own rules of operation, control and inspection.
Insurance companies for its mediating role in the financial system are few financial intermediaries with special characteristics that differentiate companies from other sectors of the economy and even with the other financial companies.
Features insurance companies
Insurance companies, in order to address the risks associated with its activity must have sufficient financial resources and therefore the law imposes certain restricciones.1
Given the desirability of permanence and stability in this sector, the legal rules generally prohibit this activity can be developed by individuals.
To ensure the solvency of insurance companies, law rejects such firms to exert any activity other than the insurer.
The exercise of financial intermediation has to inspire the utmost confidence among policyholders and investors means that these entities are subject to the protection of the State which submits to control, both for his activity as development.
Technical principles
the insurance companies must take into account a number of technical principles that assume remitter risks.1 coverage
Individualization. It required the definition and delimitation of each of the risks to classify and evaluate them and group power.
Accumulation. According to the laws of probability, the higher the risk group, the lower the fault between the theoretical probability and the number of claims. (See Bernoulli's theorem and the law of large numbers)
Risk selection. Insurers should only accept the risks by their nature, are deemed to originate not necessarily unbalanced results.
Another basic principle of insurance companies is the distribution or division of risks. The existence of the insurance technical risk to the insurer carries the need to ensure that the risks assumed under insurance contracts are homogeneous qualitatively and quantitatively, so that it meets the principle of mutual or compensation. This can be achieved by distributing time (creating reserves and technical provisions for deviations in claims in the years economically favorable or positive), geographically (only valid when the consequences are unimportant), operating in various industries and types of insurance (compensating losses among them), between the insured (through franchising or underinsurance-part of the compensation is paid by the self-), or between other coinsured or reinsurance companies, or even also a policy of risk selection adequate.
With the ability to distribute the risks assumed from other insurance and reinsurance homogeneity is achieved quantitative thereof, more easily controlled and practiced the qualitative, it is based on another fundamental principle for the insurance company, the principle distribution or division of risks, indicated generally above but also focuses on the business that is better (in normal and uniform) execute a large number of contracts with high sum insured (as in this case the deviations are older). However, for the reasons set forth above, the application of this principle alone is insufficient, given the degree of heterogeneity of the insured amounts and diversity of the risks assumed, and also can not be generalized to all companies, it also depends on the volume business, its assets, the amount or amount of reserves or reserves set up, and control (reduction of deviations) of the technical risk insurer ultimately.
Technical and safe insurance
From the economic point of view financial, insurance companies are financial intermediaries that issue as a financial asset specific policies or contracts of insurance, obtaining financing by charging the price or insurance premium, and constitute appropriate reserves or reserves (operations passive) to make pending the payment of compensation or guaranteed benefit (sum assured) or because the damage occurred or compensable loss (claim) specified in the contract, or because its possible occurrence is estimated by methods and actuarial procedures.
The technique of insurance is based on the prepayment of the resources invested in the long term, noting special reserves, the so-called technical provisions that guarantee when harmful events occur, payment of compensation per claim. The above technical reserves or provisions are invested by insurance companies usually real assets (real estate) or other financial assets (bonds or securities, credit transactions).
For the Insurance, the Insurer or Insurance Company, to receive a premium payment with the Insured is obligated to pay compensation as agreed, if it becomes the expected event. All this must be clearly established between the insured and the insurance company on a policy or contract.
The technical provisions and the solvency margin
Technical provisions
Technical provisions are those provisions which are derived immediately insurance contracts, as they form a portion of the contributions of the insured and correspond to the future obligation to them is that the insurer. They give the end of the year and are the most important item on the liability of the insurers.
The basic reason of technical provisions is based on the need to accrue income and typical expenses of insurance companies, accusing each financial year which really correspond. Ensure compliance with the commitments made by the company and although their functions are mixed according to the class of provision in question, as a whole, perform the same economic function to strengthen the solvency margin of the company through its perfect constitution and allocation to the specific purpose that each, in particular, deserves.
Insurance companies are required to establish and maintain at all times adequate technical provisions in all its activities.
The technical provisions should reflect the balance of the insurance companies the amount of the obligations arising from insurance and reinsurance contracts. They are constituted by an amount sufficient to ensure, based on reasonable and prudent criteria, all the obligations under the contracts, and to maintain the necessary stability of the insurance against random or cyclical fluctuations in claims or against compromise Special.
Solvency margin
the insurance companies must have at all times an adequate solvency margin in respect to all its activities. It will consist of the assets of the insurance company free of any foreseeable liabilities, less any intangible items. The insurers consolidated groups must have at all times, as a solvency margin of an unencumbered consolidated equity, enough to cover the amount of the legal requirements applicable to credit each of the group entities.
An insurance company or insurer is the company specializing in Insurance, whose economic activity is to produce the security service, covering certain economic risks (risks insurable) economic units of production and consumption.
Its activity is an operation to accumulate wealth through the contributions of many individuals exposed to adverse economic events, to allocate it thus accumulated the few whom the need arises. Follow the principle of mutuality, seeking solidarity among a group subject to risks.
This mutuality is organized entrepreneurially, creating a heritage that addresses the risks. The unfavorable effect of these risks, taken together, is substantially lessened because, for the insurer, individual risks are balanced: only insured suffer few, compared to the many that help pay for coverage. This allows a statistical risk management, from the economic point of view, but is kept individually from the legal standpoint.
Index
1 Financial activity
2 Characteristics of insurance companies
3 Technical principles
4 Technique and safe insurance
5 The technical provisions and the solvency margin
5.1 The technical
5.2 Solvency margin
6 References
7 See also
Financial activity
The insurance business is one of the three pillars of financial markets, along with the bank credit market and the securities markets or financial instruments. Its strategic importance, social and economic, leads to their being subject to strict administrative supervision with its own rules of operation, control and inspection.
Insurance companies for its mediating role in the financial system are few financial intermediaries with special characteristics that differentiate companies from other sectors of the economy and even with the other financial companies.
Features insurance companies
Insurance companies, in order to address the risks associated with its activity must have sufficient financial resources and therefore the law imposes certain restricciones.1
Given the desirability of permanence and stability in this sector, the legal rules generally prohibit this activity can be developed by individuals.
To ensure the solvency of insurance companies, law rejects such firms to exert any activity other than the insurer.
The exercise of financial intermediation has to inspire the utmost confidence among policyholders and investors means that these entities are subject to the protection of the State which submits to control, both for his activity as development.
Technical principles
the insurance companies must take into account a number of technical principles that assume remitter risks.1 coverage
Individualization. It required the definition and delimitation of each of the risks to classify and evaluate them and group power.
Accumulation. According to the laws of probability, the higher the risk group, the lower the fault between the theoretical probability and the number of claims. (See Bernoulli's theorem and the law of large numbers)
Risk selection. Insurers should only accept the risks by their nature, are deemed to originate not necessarily unbalanced results.
Another basic principle of insurance companies is the distribution or division of risks. The existence of the insurance technical risk to the insurer carries the need to ensure that the risks assumed under insurance contracts are homogeneous qualitatively and quantitatively, so that it meets the principle of mutual or compensation. This can be achieved by distributing time (creating reserves and technical provisions for deviations in claims in the years economically favorable or positive), geographically (only valid when the consequences are unimportant), operating in various industries and types of insurance (compensating losses among them), between the insured (through franchising or underinsurance-part of the compensation is paid by the self-), or between other coinsured or reinsurance companies, or even also a policy of risk selection adequate.
With the ability to distribute the risks assumed from other insurance and reinsurance homogeneity is achieved quantitative thereof, more easily controlled and practiced the qualitative, it is based on another fundamental principle for the insurance company, the principle distribution or division of risks, indicated generally above but also focuses on the business that is better (in normal and uniform) execute a large number of contracts with high sum insured (as in this case the deviations are older). However, for the reasons set forth above, the application of this principle alone is insufficient, given the degree of heterogeneity of the insured amounts and diversity of the risks assumed, and also can not be generalized to all companies, it also depends on the volume business, its assets, the amount or amount of reserves or reserves set up, and control (reduction of deviations) of the technical risk insurer ultimately.
Technical and safe insurance
From the economic point of view financial, insurance companies are financial intermediaries that issue as a financial asset specific policies or contracts of insurance, obtaining financing by charging the price or insurance premium, and constitute appropriate reserves or reserves (operations passive) to make pending the payment of compensation or guaranteed benefit (sum assured) or because the damage occurred or compensable loss (claim) specified in the contract, or because its possible occurrence is estimated by methods and actuarial procedures.
The technique of insurance is based on the prepayment of the resources invested in the long term, noting special reserves, the so-called technical provisions that guarantee when harmful events occur, payment of compensation per claim. The above technical reserves or provisions are invested by insurance companies usually real assets (real estate) or other financial assets (bonds or securities, credit transactions).
For the Insurance, the Insurer or Insurance Company, to receive a premium payment with the Insured is obligated to pay compensation as agreed, if it becomes the expected event. All this must be clearly established between the insured and the insurance company on a policy or contract.
The technical provisions and the solvency margin
Technical provisions
Technical provisions are those provisions which are derived immediately insurance contracts, as they form a portion of the contributions of the insured and correspond to the future obligation to them is that the insurer. They give the end of the year and are the most important item on the liability of the insurers.
The basic reason of technical provisions is based on the need to accrue income and typical expenses of insurance companies, accusing each financial year which really correspond. Ensure compliance with the commitments made by the company and although their functions are mixed according to the class of provision in question, as a whole, perform the same economic function to strengthen the solvency margin of the company through its perfect constitution and allocation to the specific purpose that each, in particular, deserves.
Insurance companies are required to establish and maintain at all times adequate technical provisions in all its activities.
The technical provisions should reflect the balance of the insurance companies the amount of the obligations arising from insurance and reinsurance contracts. They are constituted by an amount sufficient to ensure, based on reasonable and prudent criteria, all the obligations under the contracts, and to maintain the necessary stability of the insurance against random or cyclical fluctuations in claims or against compromise Special.
Solvency margin
the insurance companies must have at all times an adequate solvency margin in respect to all its activities. It will consist of the assets of the insurance company free of any foreseeable liabilities, less any intangible items. The insurers consolidated groups must have at all times, as a solvency margin of an unencumbered consolidated equity, enough to cover the amount of the legal requirements applicable to credit each of the group entities.
