ANALYSIS OF FINANCIAL PRINCIPLES OF AN INSURANCE COMPANY’S OPERATIONS

Abstract

One of the most important conditions for an insurance company’s operation is to secure and utilize the necessary monetary and other funds in the required amount in order to settle all liabilities properly - first and foremost to policyholders, then to suppliers, employees and the state. Insurance companies, as one of the most important links in the chain of social reproduction of financial flows, largely establish their success and development on the financial principles of operations. They rely on a multitude of factors, but are nevertheless based on the number, scope and extent of concluded insurance contracts, i.e. on the insurer's insurance portfolio.

In their operations, insurance companies must comply with several indispensable financial and economic principles: security, liquidity, productivity, cost- effectiveness and profitability. It is important to emphasize that the implementation of the stated principles in insurance companies is characterized by both the distinctiveness arising from the peculiarities of the insurance business itself and the lack of general agreement on the manner of its expression. The subject of the research in this paper will be precisely the principles that characterize the financial side of insurance companies’ operations, regardless whether they are engaged in life or non-life insurance operations.