Page 154 - ic92 actuarial

The Insurance Times

Q1. Write short notes on -

a) Balanced sheet - The balance sheet reports on the
financial position of the firm at a specific point in time.
It shows the levels of assets and liabilities, and the status
of the shareholders' equity, or surplus, for the insurer.

The reporting follows the following equation:
Assets = Liabilities + Owners' Equity

An asset is an economic resource that is held by the
firm. An asset can be cash, stocks, bonds, real estate,
or agents' receivables etc. Liabilities are claims on the
resources of the firm to satisfy obligations of the firm.
Liabilities can be mortgages, bank debt, bonds issued,
premium received from clients, but not yet earned, or
benefits payable on behalf of clients due to contractual
obligations etc.

Loss and loss expense liabilities are frequently the largest
liabilities of an insurer. Owners' equity is the owners'
claim on the assets of the firm. The owners' claim is
always subordinate to all the other liabilities of the firm.

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