The pool of resources from which compensation is to be paid must be large enough to meet all possible eventualities, and the insurance companies therefore maintain adequate 'catastrophe reserves'. These reserves are invested as carefully as possible.
A high proportion of this reserves is for life-assurance cover, which will be paid out to widows and orphans when death occurs. The rest is for general insurance activities, fire, marine, and accident policies. Clearly the skill of the investors in the service of the insurance companies is of the utmost importance to the policy holders and the shareholders of the companies.
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