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CFA Level I · CFA Level I Exam · Portfolio Management: An Overview

A non-life insurance company writes policies with uncertain claim timing and amounts. Relative to a life insurance company, the non-life insurer's portfolio is most likely to emphasize:

The non-life insurer will most likely emphasize liquidity and shorter-term, higher-quality securities. Claims arise unpredictably and are typically settled sooner than life insurance obligations, so it needs assets that can be sold quickly without loss, unlike a life insurer that can hold long-term illiquid assets.

  1. Aliquidity and shorter-term, higher-quality securitiesCorrect
  2. Blong-term illiquid assets to capture a premium
  3. Chigh allocations to equities to maximize growth

Explanation

Property and casualty claims are shorter-tailed and less predictable than life claims, so non-life insurers need more liquidity and typically hold shorter, high-quality securities. Life insurers, with more predictable long-term liabilities, can hold more illiquid long-term assets.

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