What are the traditional types of investments made by a life insurance company?
Insurance companies tend to invest most of the premium in bonds, and the rest in stocks, mortgages, and liquid short-term investments. Bonds, stocks, and mortgage instruments comprise around 90 percent of investments for life insurance companies, and over 80 percent of those for property and casualty insurers. Among the top three asset classes are bonds, which include corporate bonds, municipal bonds, US government bonds and foreign government bonds. Followed by liquid short-term investments and cash is the fourth largest asset class. Insurance companies also invest in derivatives, contract loans, securities lending, real estate, and preferred stock. All the minor investments are meant to add diversity for risk management
What are reasons for life insurance companies entering into venture capital?
Life insurance companies prefer to invest the premiums for two reasons: increasing the profits for more stable money sources, and possibly lowering its premium amount for more clients. While most insurance companies invest mostly in bonds, stocks and mortgages, life insurance companies have been taking a more active role in recent years, and even establishing their own venture capital divisions.
The motivations for life insurance companies entering into venture capital can be primarily attributed to the following three reasons.