Solvency margins. Technical risks. The adequacy of premium reserves

Document description

Compared with the outstanding claims reserve, the potential for insolvency caused by factors affecting premium reserves is perhaps minor, though an awareness of their effects is no doubt valuable as far as obtaining an overall picture of a company's solvency is concerned. It is not impossible to envisage certain circumstances where the points described in this note become relevant though they may be unlikely or such that the adequacy of a company's premium reserves is the least of the company's worries at the time!Of interest, would be the extent to which various companies investigate the factors discussed either formally or informally. To what extent do/should such consideration form a regular part of the financial management of insurance companies and therefore carry over into any independent investigation of solvency. Or is it sufficient to examine them only occasionally or not at all but to be aware merely of the general financial effect of the environment in which insurance companies operate?