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Non-Tech : Insurance cos (proposed buy outs, etc. discussion)
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To: Carey Thompson who wrote (29)11/9/1999 8:42:00 AM
From: QuietWon  Read Replies (1) of 55
 
Carey, not all insurance is long-tailed - several types of insurance are 1,2,3-year renewable without future claim possibilities.

Buffett used the car insurance premiums to invest in the stock market - heck, if no claims occur, it's money in the bank and as long as the premium inflow keeps pace, the car ins. co. can invest in equities.

For life insurance co's, they back the liability with mostly fixed-income securities (eg bonds) and when interest rates rise, the value of the assets (which is to support the liabilites) drops, so if the ins co has to cash in its investments prematurely, the unrealized loss gets realized and ins co takes the loss.
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