33 Investment

Question 1

Investment principles

Answer 1

Investment principles:

• The principles of investment are that an insurance company should select investments that are appropriate to the nature, term and currency of its liabilities.
• The investments should also be selected so as to maximise the overall return on the assets, where the overall return includes both income and capital.
• The extent to which the company may depart from investing in appropriate investments in order to match its liabilities, depends amongst other things on the extent of the company’s free assets.

Or (for second two bullets) these investment principles can also be expressed as:

The life insurance company should invest so as to maximise the overall return on the assets, subject to the risks being taken on being within the financial resources available to it.