An Insurance is a policy or contract in which an insurance company provides financial protection or reimburses the losses of an individual or particular entity. The risks of the clients are pooled by the Insurance Company so that the payments are more affordable to the insured. A premium is charged for a particular insurance coverage amount.
The Insurance Companies can be categorized into two broad types:
- Life Insurance Companies: They sell annuities, life insurance, and pension products.
- Non-Life Insurance Companies or General Insurance Companies: They sell other forms of insurance.
In maximum countries of the world, different taxation, accounting, and regulatory guidelines are applicable for the Life and Non-Life Insurance Companies. The primary cause of this difference between the two types of companies is that the business of the Life Insurance Companies is long-term in nature. The coverage for pension or Life Insurance covers risk for a number of decades. On the other hand, Non-Life Insurance Companies generally cover a period, which is shorter, for example 1 year. Usually, Insurance Companies are either Mutual or Stock Companies. This is a conventional classification because True Mutual Companies are becoming uncommon. The owners of Mutual Companies are the policyholders and the owners of Stock Insurance Companies are the stockholders. Other forms of Insurance Companies include Lloyds organizations and Reciprocals.
The rating of Insurance Companies is done by a number of agencies, for example A.M. Best. The ratings are based on the financial strength of the company. It is seen whether the company is able to make the payments of claims. The financial instruments issued by the Insurance Company are also rated.
Insurance Companies who sell Insurance Policies to other Insurance Companies are called Re-Insurance Companies. This is done in order to diversify their risk and for protection from huge losses.
Captive Insurance Companies are Limited-Purpose Insurance Companies, which are formed with a particular objective. The objective is to finance the risk arising from the parent group.
Some of the Leading Insurance Companies of the world are the following:
- Merrill Lynch
- Metlife (CitiStreet)
- T&D Holdings
- Morgan Stanley
- Wells Fargo
- Goldman Sachs
- JP Morgan Chase