IC 14 - Regulation of Insurance Business Exam Study Notes

Technical reserves : the assets that an insurance company maintains to meet future claims for losses.
The technical reserves required can be classified as follows: Reserves for unexpired risks, Reserves for incurred but unreported claims, Reserves for outstanding claims, Fluctuation reserves
Modern Portfolio Theory (MPT) : The fundamental concept behind MPT is that the assets in an investment portfolio should not be selected individually, each on their own merits. Rather, it is important to consider how each asset changes in price, relative to how every other asset in the portfolio changes in price.
Investing is a trade-off between risk and expected return. In general, assets with higher expected returns are riskier. For a given amount of risk, MPT describes how to select a portfolio with the highest possible expected return. Or, for a given expected return, MPT explains how to select a portfolio with the lowest possible risk(the targeted expected return cannot be more than the highest-returning available security, of course, unless negative holdings of assets are possible.)
MPT is, therefore, a form of diversification. Under certain assumptions and for specific quantitative definitions of risk and return, MPT explains how to find the best possible diversification strategy.

Licentiate Examination - IC 14 - Regulation of Insurance Business Exam - Important Points