Insurance Company is the company, which sells Insurance Policies.
An Insurance is a policy or contract in which an insurance company provides financial protection or
reimburses the losses of an individual or particular entity. The risks of the clients are pooled by the Insurance
Company so that the payments are more affordable to the insured. A premium is charged for a particular
insurance coverage amount.
The Insurance Companies can be categorized into two broad types:
Life Insurance Companies: They sell annuities, life insurance, and pension products.
Non-Life Insurance Companies or General Insurance Companies: They sell other forms of insurance.
In maximum countries of the world, different taxation, accounting, and regulatory guidelines are applicable for
the Life and Non-Life Insurance Companies. The primary cause of this difference between the two types of
companies is that the business of the Life Insurance Companies is long-term in nature. The coverage for
pension or Life Insurance covers risk for a number of decades. On the other hand, Non-Life Insurance
Companies generally cover a period, which is shorter, for example 1 year. Usually, Insurance Companies are
either Mutual or Stock Companies. This is a conventional classification because True Mutual Companies are
becoming uncommon. The owners of Mutual Companies are the policyholders and the owners of Stock
Insurance Companies are the stockholders. Other forms of Insurance Companies include Lloyds organizations
and Reciprocals.
The rating of Insurance Companies is done by a number of agencies, for example A.M. Best. The ratings are
based on the financial strength of the company. It is seen whether the company is able to make the payments of
claims. The financial instruments issued by the Insurance Company are also rated.
Insurance Companies who sell Insurance Policies to other Insurance Companies are called Re-Insurance
Companies. This is done in order to diversify their risk and for protection from huge losses.
Captive Insurance Companies are Limited-Purpose Insurance Companies, which are formed with a particular
objective. The objective is to finance the risk arising from the parent group.
Insurance is a form of risk management, primarily used to hedge against the risk of a contingent or an
uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in
exchange for payment.
An insurer is a company selling the insurance; an insured or policyholder is the person or entity buying the
insurance policy. The insurance rate is a factor used to determine the amount to be charged for a certain
amount of insurance coverage, called the premium
Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and
practice.
An insurance contract promises to make good to the insured a certain sum in consideration for a payment in the
form of premium from the insured. The insured receives a contract called the insurance policy which details
the conditions and circumstances under which the insured will be compensated.
Market integration among the world has largely benefited the financial market. Congruously, the Insurance
industry over the world has grown very rapidly. The statistics on the world insurance conducted by Swiss Re
show that world insurance premium reached $3.4 trillion in 2005. Premium collections from both life and non-
life sources have increased by 3.9 and 0.6 percent respectively. Developed countries over the world have better
insurance coverage. But in recent years the developing nations have captured a better market share in the
insurance business. In leading countries the insurance business and premiums for 2005 include:
Countries Non-Life Premiums Life Premiums Total Amount
U.S. $625,838 $517,074 $1,142,912
Japan 100,523 375,958 476,481
U.K. 100,629 199,612 300,241
France 68,162 154,058 222,220
Germany 107,026 90,225 197,251
Italy 47,453 91,740 139,194
South Korea 24,085 58,848 82,933
Canada 44,267 34,456 34,456
Netherlands 29,159 31,914s 61,073
Spains 34,757 25,518 60,275
Source: Swiss Re, sigma, No. 5/2006