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Liability insurance (also called third-party insurance) is a part of the general insurance system of risk financing to protect the purchaser (the "insured") from the risks of liabilities imposed by lawsuits and similar claims and protects the insured if the purchaser is sued for claims that come within the coverage of the insurance policy.
Business firms use a financial analysis technique called asset vs. liability management (ALM) to mitigate risk due to a mismatch in their assets and liabilities. A mismatch occurs when assets and ...
The accounting equation relates assets, liabilities, and owner's equity: Assets = Liabilities + Owner's Equity. The accounting equation is the mathematical structure of the balance sheet. Probably the most accepted accounting definition of liability is the one used by the International Accounting Standards Board (IASB). The following is a ...
For example, if a company with five equal-share owners has $1.2 million in assets but owes $485,000 on a term loan and $120,000 for a semi-truck it financed, bringing its liabilities to $605,000 ...
Like any other company, an insurer has to show that its assets exceeds its liabilities to be solvent. In the insurance industry, however, assets and liabilities are not known entities. They depend on how many policies result in claims, inflation from now until the claim, investment returns during that period, and so on.
Asset and liability management (often abbreviated ALM) is the term covering tools and techniques used by a bank or other corporate to minimise exposure to market risk and liquidity risk through holding the optimum combination of assets and liabilities. [1]
Different countries use different methodologies to calculate the solvency ratio, and have different requirements. For example, in India insurers are required to maintain a minimum ratio of 1.5. [1] For pension plans, the solvency ratio is the ratio of pension plan assets to liabilities (the pensions to be paid).
For example, a homeowner's insurance policy will normally include liability coverage which protects the insured in the event of a claim brought by someone who slips and falls on the property; automobile insurance also includes an aspect of liability insurance that indemnifies against the harm that a crashing car can cause to others' lives ...