"Risk is inherent in nature." Discuss the different categories of risks encountered by Insurance companies.

Investing in the insurance business can be a daunting task if you are a newbie to start with. There are certain insurance risks that have effected this industry and the failure to do something to avert the risk can be detrimental to the success of your insurance company. 6 Common Risks faced by Insurance Companies Some common types of Insurance Risks are given below: Liquidity Risk Liquidity is the ease in which business assets can be converted into cash. This is an important aspect of consideration for success in an insurance company. Liquidity risks may arise due to a large number of claims in general insurance and a large surrender of policies in life insurance. This may lead to a loss of the company property in case when the company may not be able to raise the required cash. Actuarial Risks Actual studies deal with the study of risks and quantifying the amount of compensation accorded to each risk. Actuarial risks may be caused by different factors such as mortality rate variance, perils and certain other variance. Calculations of the given risks may be subjected to a variety of adjustments. One may consider current statistical data, some past experience and future possibilities but it is to be noted that in the future, there may be a great variance in the speculated and the risks amount. Reputation Risks Reputation risks are faced when an insurance company has lost value in the insurance market. This has a great impact on the amount of revenue which will be raised by the insurance company. In the short run, it may not be an easy task to quantify the exact value caused by the reputation risks but adverse results may pop-up during auditing. In extreme cases, reputation risks may lead to bankruptcy also. Business Risks Business risks that are faced by the insurance company are just the normal risks faced by many other businesses. Risks ranging from data breaches have resulted in a loss of the great amount of relevant data in the insurance industry. Other related business insurance risks include human capital loss, loss of damage and some of the relevant professional service mistakes that may be relevant. There is a lot to do when faced with these risks. A lot of professionalism is required to handle these risks, especially in the insurance industry. Strategic Risks Strategic risks in the insurance sector require excellent strategic management skills to avert such risks. Strategic risks involve the process of identification, assessing and the management of the insurance strategy. Underwriting insurance Risks Underwritings of risks results from the process of selection and approval of the risks that need to be insured. Insurance risks may also be caused by the use of an inflexible underwriting process of risks. The process of underwriting forms the basis of insurance and the failure to get it right at this step may result in great loses in the future. Insurance Risks (Pricing and Product Line Profit) The risk arising from the exposure to financial loss from transacting insurance and/or annuity business where costs and liabilities experienced in respect of a product line exceeds the expectation in pricing the product line. Newer product lines experience losses due to the high expenses of operating an under-scale business. Insurers are always worried about their pricing and profitability, and the market price is not always correct. There is a persisting temptation to label a jump in claims as a temporary aberration or to cut rates to increase sales. Pricing and product- line profit issues are predominantly a higher- frequency and lower- severity risk.