Insurance companies are organizations that have any form of legal type provided by law. These can be limited liability companies, as well as joint stock companies. The purpose of the formation of such insurance organizations is the implementation of insurance purposes in the Russian Federation.
Insurance companies for the implementation of insurance, in the prescribed manner receive a special permit. In order to ensure the insurance obligations assumed, insurers create insurance reserves from the contributions of policyholders. Investment activities of insurance companies are based on the principles of liquidity and profitability, as well as diversification and repayment. The above fundamental principles, called in such a process as the investment activities of insurance companies, apply to both free and occupied assets.
The investment activity of an insurance organization is determined by the fact that such organizations have both their own funds and attracted resources. If we talk about such a process as the investment activity of insurance companies, it should be understood that own funds are funds of the authorized capital of a legal entity - an insurance company, and attracted funds are reserves held by a company in such a process as investment activities of an insurance company.
Reserves are the largest source of resources of the insurer. It should be noted that for the main types of insurance, with the exception of agreements on obtaining an insurance policy in connection with life insurance, insurance reserves are usually used by the company during the year. For such a period, on average, all insurance contracts are concluded. It should also be understood that at any time from these reserves funds may be needed to pay the insured event, which, in principle, may arise even the next week after the conclusion of the insurance agreement. Based on this, the funds that the organization receives from insurers can be invested in liquid and short-term assets . Exceptions to this circumstance, in the presence of certain conditions, may be funds collected in reserves - stabilizers and in reserves for balancing losses. These reserves are used to provide compensation to insurance companies' customers in cases provided for by agreement of the parties.
As for life insurance, it should be noted that this type of agreement is concluded for a long period of time, literally up to 15 years. This, in turn, allows insurance companies to invest in long-term projects, on the other hand, to significantly reduce liquidity requirements for such long-term investments. On this basis, life insurance activities provide a long-term capital connection, and reserve funds, according to life insurance, are the main means of investing finance of insurance organizations in the most successful and efficient investment objects.
However, life insurance in our country has not acquired mass character, as evidenced by 20% of these contracts in comparison with other insurance contracts. Note that the reasons for this situation are many factors of an objective and subjective nature, in particular, the low standard of living of Russians and the rejection of this type of insurance in favor of property insurance agreements. In addition to attracted funds, insurers use their own funds that they invest in investment objects. Authorized and reserve, additional capital, as well as reserve funds may act as equity. Actually, in this way, the activities of insurance companies under consideration are implemented in modern society. Foreign investment insurance is carried out by the laws of our country in force in this area.
Thus, the real capabilities of a particular insurance company that participates in investment activities depends on its potential. The potential, in turn, acts as a combination of financial resources that are in a temporary free state and which are used by investors in solving such a problem as making a profit. The process of fulfilling the potential in the investments of the organizations under consideration is an activity on insurance of individual capital and insurance fund. The potential investment destination is the area of the financial reserve, which remains after deducting expenses, borrowed funds and insurance payments. In the case of an increase in the volume of payments indicated above, to a greater extent than an increase in the volume of the fund of the insurance organization and individual capital, a situation of a decrease in investment potential is possible with an increase in financial indicators. The investment activity of insurance companies is a source of an additional type of insurer's income, excluding income from insurance operations.