Key Functions of Insurers in the Context of Crisis
Abstract
Insurance business pursued by insurers and reinsurers is indispensable and crucial for the society. It comprises fundraising from insured persons and insuring parties under concluded compulsory or voluntary insurance contracts (policies). The funds raised from insurance installments under concluded insurance policies are managed, invested and paid by the insurers to insured persons or to beneficiaries in the form of compensations or insured sums upon occurrence of insured events as set out in the Code of Insurance and/or in the insurance contract.
Insurers carry out their specific insurance business in highly risky environment. For that reason, their insurance business and their accounting should be subject to government supervision in order to ensure the security of their insured persons and to maintain the public trust in insurance services. The organization, methodology, methods and technology of the reporting process of the business pursued by insurers should adhere to the requirements for application of the principles, concepts, rules, legal provisions and customs arising from the International Financial Reporting Standards/ International Accounting Standards (IFRS/ IAS), from the European Union Directives, from the national insurance and accounting legislation and from the directions and instructions of the state insurance supervisory authority. The regulation and management of insurance business is practically expressed upon determining the specific reporting subjects, the rules for preparing specific financial statements of insurers and upon defining their key functions.
The specific features of the insurance business determine the specific key functions of insurers. These functions require continuous financial and accounting analysis, ex ante, ongoing and ex post control by the management bodies of the insurance company in terms of the structure of the resources (assets) that are used to cover the insurance (technical) provisions, and of the amount and composition of these provisions, which determine the amount of insurers’ obligations (liabilities) to the insurance policyholders upon occurrence of insured events.
References
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