Many states in the U.S.impose liquid asset ratios on insurance companies which may be met by
A)cash and excess reserves.
B)cash and municipal bonds from within the state of operation.
C)cash and government securities.
D)cash and policyholder reserves.
E)cash only.

Question

Quizplus · Accepted Answer

Many states require insurance companies to maintain a certain liquid asset ratio, which can be met by holding cash and government securities. Government securities are considered safe investments and are therefore an acceptable way for insurance companies to meet their liquidity requirements. Option A is incorrect because policyholder reserves are not considered a liquid asset. Option B is incorrect because municipal bonds from within the state of operation may not be considered as liquid as government securities. Option D is incorrect because policyholder reserves are not considered a liquid asset. Option E is incorrect because holding cash only may not be enough to meet the required liquid asset ratio.

Many States in the U