Which of the following can create liquidity risk for a life insurer?
I. Unexpectedly high number of policy surrenders
II. Unexpectedly low number of new policies sold
III. Unexpectedly high insurance claims filed by policyholders

Question

Quizplus · Accepted Answer

All three scenarios can create liquidity risk for a life insurer. Unexpectedly high number of policy surrenders requires the insurer to pay out cash sooner than expected. A low number of new policies sold can result in lower than expected cash inflows. High insurance claims filed by policyholders also demand significant cash outflows. Each of these situations can strain the insurer's liquidity.

Which of the Following Can Create Liquidity Risk for a Life