PLEASE ONLY FINANCE EXPERT ANSWER THIS QUESTION. THIS MUST BE CORRECT AND PERFEC

Question

PLEASE ONLY FINANCE EXPERT ANSWER THIS QUESTION. THIS MUST BE CORRECT AND PERFECT!!

PLEASE DO NOT COMBINE THE ANSWERS INTO ONE PARAGRAPH, ANSWERS OF A AND B SHOULD BE SEPARATED. DO NOT ANSWER THIS WITH YOUR HANDWRITING, PLEASE TYPE ON YOUR COMPUTER!!

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A. Discuss why Property & Casualty Insurers must be concerned about their investment yield.   

B. As a result of their investment yield concerns, what are some suggestions for how this industry could change the way it conducts its business.  

Explanation / Answer

A) Property and Casualty insurers must be concerned about their investment yield because they settle claims and generate profits only after investing their premiums earned. Thus, higher investment yields leaves them with higher profits even after the settlement of their claims.

B) Observing that U.S interest rates are about to be hiked, it is likely that the market expectations regarding investment returns would be conservative. In such a scenario, we expect insurers to write policies in a more prudential manner. Thus, premiums might increase and insurance firms might become even more careful with the due diligence of their potential clients.

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