The efficiency of the company's activities is determined by the indicators of financial results from all types of activities. It is expressed as profit or loss. The first is a source of increasing capital and fulfilling obligations to creditors and the budget. In the process of activity, the insurance company performs many functions: it concludes contracts, calculates rates, collects premiums, assumes responsibility, forms reserves, invests funds in order to generate income. The organization needs funds to carry out these actions.
One of the indicators that characterize the financial reliability of the company is the insurance portfolio. This is a set of concluded contracts for certain amounts. In fact, it is a reflection of the company's obligations to customers. Creating a sustainable portfolio is an important goal of the organization. The degree of responsibility of the structure under the adopted agreements depends on its size. In order to ensure the sustainability of activities, it is rational to create an insurance portfolio with a large number of transactions with a low degree of responsibility. The payment of reimbursement should not reflect on the financial position of the company.
The number of concluded contracts does not indicate a stable situation. The lion's share of customers can be attracted by offering lower rates. A large insurance portfolio means a high amount of liabilities. But if the tariffs are low, the funds raised may not be enough to pay.
On the other hand, a large amount of liabilities will allow the insurer to invest in risky objects. If a company mainly concludes short-term contracts, then its transactions are subject to an additional requirement - high liquidity. The organization must be able to quickly realize assets and meet its obligations if necessary.
The quality of the insurance portfolio
This indicator is characterized in the following ways:
- A value that includes the number of concluded contracts and their total amount.
- Homogeneity of risks. The heterogeneity of liabilities with a small portfolio can lead to unpredictable results. In such transactions, it is impossible to use statistical patterns to analyze settlements. Volatility can also be caused by a company taking on a large number of similar risks.
- Equilibrium - the ratio between the number of old and new concluded contracts. Ideally, new transactions should fully compensate for previous ones, while maintaining a balance between the amounts due and the amountrisks.
- Stability - the number of contracts that will be paid before the end of their validity.
An analysis of the insurance portfolio should be carried out in order to assess financial capabilities and adjust its structure if necessary.
The company's insurance portfolio in different periods of time includes a differentiated amount of responsibility. To reduce the risks of the organization, they resort to the help of reinsurers. The company determines the retention limit in accordance with risk groups and its capabilities. The state authorities set the maximum amount of personal liability of the organization in the amount of 10% of its own funds. The rest of the company must be given to reinsurance. The Russian market is still characterized by a low level of own funds and, accordingly, a liability limit.
By transferring risk, the organization reduces the size of funds, which ensures the financial sustainability of operations. This is especially true for newly created structures whose insurance portfolio is not sufficiently developed. Taking a large number of identical risks, a company can get into a situation of simultaneous accumulation, when all obligations have to be covered at once. In practice, this becomes the reason for the bankruptcy of organizations, since the payment of funds requires not only the created reserves, but also the capital of the company. Therefore, the insurance portfolio is a source of resources, the quality of the structure of which determines the financial stability of the organization.
The transfer of responsibility allows you to solve some of the problems:
- Compensate for a very large risk resulting from a catastrophic event. For example, in the event of an epidemic, cumulation occurs, which is already extremely dangerous for the insurer, as it increases its costs.
- Stabilize the organization's performance over an extended period after adverse results throughout the year.
- Increase market competitiveness.
- Build a balanced insurance portfolio.
- Protect assets.
The insurance portfolio is a set of concluded contracts. Although the level of risk for them may be high, before transferring part of the obligations to another company, it is worth evaluating the cost-effectiveness of such a decision. Reinsurance operations are carried out for a surcharge. The size of the commission should correspond to the share of distributed responsibility. An important point is also the determination of the level of self-retention, which depends on the financial capabilities and profitability of operations. Too high a limit leads to financial instability, too low - to profitlessness.
The transfer of risks from one organization to another is possible only under the supervision of government agencies. At the same time, the structure of the insurance portfolio should include:
- obligations under contracts corresponding to the formedreserves;
- assets held to cover risks.
The insurer transfers the portfolio formed at the time of the decision. It also includes obligations under current contracts and those whose validity period has expired, but the obligations have not been fulfilled in full. For a specific object, risks can be transferred to one insurer.
The value of assets can be equal to the formed reserves or be less than them. Surcharges are allowed only if their amount does not exceed the difference between the transferred property and the capital of the company. The operation is prohibited if the amount of assets is less than half of the transported reserves. The exception is cases of bankruptcy of the company. In case of insufficiency of transferred assets, the remaining part can be compensated by the association of insurers. The amount of payments is determined by federal laws. The value of the transferred assets is equal to their book or market price.
Grounds for the transfer of contracts
There are several:
- revocation of the license to carry out activities at the initiative of the supervisory authority;
- in the event of a decision to liquidate the organization, the insurance portfolio is subject to full transfer to another company;
- violation of the established solvency requirements, as a result of which the financial condition of the organization worsened, if the transfer of the portfolio is provided for by the liquidity recovery plan;
- making a decision to voluntarily give up certain types of activities;
- exclusion of a company fromassociations of insurers in cases provided for by law.
The insurance portfolio is the number of contracts concluded by the company for certain amounts. It is the main source of cash flow. But with poor-quality management of the structure, it can cause the bankruptcy of the organization. Therefore, it is important to properly form and allocate risks and responsibilities under contracts. However, the services of reinsurers are not free. Therefore, it is necessary to evaluate the economic efficiency of the transaction before its conclusion. The process itself is under strict government control.