Main Income and Expenses in P&C Insurance

Insurance premiums

• Income (insurance premiums) is generated by selling insurance policies to clients (policyholders).
• Most of the insurance risk is carried in If's own balance sheet but a part of it is transferred to reinsurers for a fee. This fee is deducted from insurance premiums written. This procedure limits the risk taken in a single event.

Net investment income

• Majority of the funds collected as insurance premiums are invested in financial markets.
• Investments are made in financial instruments (debt securities and equities) and real estate properties. Return on these investments is a major component affecting the profitability of the P&C insurance operations.
• Investment activities generate income but also costs (e.g. interest expenses, asset management costs).

Claims

• When an insured event (e.g. car accident, fire or flood) occurs, claims are paid to the policyholder according to the nature of the event and the scope of the insurance cover.
• If the claim relates to reinsured policies, then the reinsurer pays its share of the claim to If.

Costs for running the business

• Operating and other expenses mostly consist of staff costs, expenses related to the sales and management of insurance policies, investment management and other administration.
• Taxes are paid according to local tax legislations and consolidated at a Group level.