Study Notes: Insurance Companies and Pension Plans

Chapter 2. Insurance Companies and Pension Plans Study Notes cover the following learning objectives:

* Describe the key features of the various categories of insurance companies and identify the risks facing insurance companies.

* Describe the use of mortality tables and calculate the premium payment for a policy holder.

* Distinguish between mortality risk and longevity risk and describe how to hedge these risks

* Describe a defined benefit plan and a defined contribution plan for a pension fund and explain the differences between them.

* Calculate and interpret loss ratio, expense ratio, combined ratio, and operating ratio for a property-casualty insurance company.

* Describe moral hazard and adverse selection risks facing insurance companies, provide examples of each, and describe how to overcome the problems.

* Evaluate the capital requirements for life insurance and property-casualty insurance companies.

* Compare the guaranty system and the regulatory requirements for insurance companies with those for banks.

After reviewing the notes, you will be able to apply what you learned with practice questions.

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