The insurance field is one that is comprised of uncertainty and unpredictability and hence, diving into the field will involve taking a lot of risks, the outcome of which can hugely affect your financial position. A company in Ireland would have Irish public liability insurance in the case that they a claim for injury or death. This is a potential risk for the company as injury and death claims can be expensive.In this article we have proceeded to list out some of these expected risks in the insurance sector:

Credit Risk

Credit risk in brief words is the risk present in the events of lending and investment and can also be brought about by clients, brokers, agents, etc. Generally, concentrating your investments on an industry, geographical area, economic sector, and counterparty is considered extra risky.

Market Risk

Market risk is what arises from price fluctuations in the market and other market movements that can adversely affect your financial position. Changes in currency value and interest rates can in turn greatly influence asset value in the market. Market risk is, however, unavoidable should you venture into the insurance sector.

Liquidity Risk

Liquidity is concerned with the present and future maintenance of proper levels of money and liquid assets. Usually, there is no liquidity problem as there is a delay between the receipt of the premium and the payment of claims. A liquidity risk concerning life insurance arises out the surrender of a huge number of policies and concerning general insurance due to the renewal of certain policies and claims. This risk can cause a loss in value of the asset as it is forced into sale during slumps in the market.

Actuarial Risk

Actuarial Risk is the risk that arises when there is a variation in the premium rate due to variation in mortality rates, perils, hazards when projected with the actual position, which can refer to instances of early termination of policies and catastrophes. The work involved is a systematic analysis of risk and the consequent loss to help decide the price of the premium. Furthermore, these calculations are deeply based on statistics, probabilities, and experience.

Other Risks

These risks involve Operational Risks (includes human failure, fraud, technology failure), violation of regulations which may either be systemic or un-systemic. Systemic risk is industry-wide or even country-wide. Examples of systemic risk include recession, inflation, war, etc. while un-systemic risk is company-wide and covers risks such as failure in management, fraud, etc.

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