Homework Answers
There many ways in which property and casualty insurance company's balance sheet is different from retail, some of them are as follows:
1) Such insurance companies are highly risk averse and have
investment holdings only in blue chip stocks and fixed income
securities. Due to this practice the unique thing which happens is
that the debt to capitalization ratio is less than 35%.
2) Generally in sectors like retail where reserves to anticipated
loss reserves are kept in multiples of 2.5 to 1, in insurers case
that is much higher and unique to industry. Sometimes this multiple
goes up to 10 times. This happens because insurers take risk on
behalf of primary insurers.
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