Which statement is true regarding the reserves kept by insurance companies?
A) They take several weeks to sell and convert to cash.
B) They are usually not enough to cover unexpected losses.
C) They are kept in financial assets such as stocks, bonds, and U.S. government securities.
D) They are more likely to be in the form of stocks when invested by life insurance companies.
E) They are more likely to be in the form of bonds when invested by property casualty insurance companies.

Question

Quizplus · Accepted Answer

Because they have guaranteed payment, insurance companies need reserves to cover unexpected losses. Reserves are kept in financial assets such as stocks, bonds, and U.S. government securities. These assets are liquid, meaning they can be sold quickly and turned into cash within a few days. Life insurance companies tend to invest more conservatively with a larger percentage of their assets invested in bonds, whereas property casualty companies tend to have a larger percentage of stocks than life insurance companies.

Which Statement Is True Regarding the Reserves Kept by Insurance