Insurer

Insurers collect premiums from many customers and use that money to pay claims from the relatively small number who suffer losses. This allows individuals and businesses to protect themselves against financial risks they could not afford to bear alone.

Insurers specialise in different types of cover. Life insurers provide life insurance, annuities and some pension products. General insurers, also called property and casualty or non-life insurers, cover homes, cars, businesses, travel and liability. Health insurers cover medical costs.

Insurers earn money in two main ways: from underwriting, if premiums exceed claims and expenses, and from investing the premiums they hold before claims are paid. For example, an insurer might collect premiums at the start of the year and invest them in bonds, earning income until the money is needed to pay claims.

Because insurers make promises that may need to be kept many years into the future, they are closely regulated. Rules require them to hold enough capital and reserves to pay expected claims, and to manage risks carefully. Many insurers also buy reinsurance to protect themselves against very large losses.