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INSURANCE: Transferring risk to others. The need for insurance occurs because people tend to be risk averse in many circumstances. As such, most of us are willing to pay for certainty. Those who satisfy this need for insurance, insurance companies for example, do so because they can pool risk. If insurance companies know the chance of some loss (an accident, illness, or whatever) and its cost, then they can divide this cost among a large group of risk averse types. The insurance company agrees to pay the cost of the loss and each of the risk averse types pay a risk premium, but get the peace of mind that goes with certainty.
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BANK ASSETS What a bank owns, including loans, reserves, investment securities, and physical assets. Bank assets are typically listed on the left-hand side of a bank's balance sheet. Bank liabilities, what a bank owes, are listed on the right-hand side of a bank's balance sheet. Net worth is the difference between assets and liabilities. The largest asset category of most bank is loans, which generates interest revenue. A critical asset category used to maintain the safety of deposits is reserves (vault cash and Federal Reserve deposits).
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GRAY SKITTERY [What's This?]
Today, you are likely to spend a great deal of time at the confiscated property police auction wanting to buy either a replacement remote control for your stereo system or a computer that can play video games and burn DVDs. Be on the lookout for gnomes hiding in cypress trees. Your Complete Scope
This isn't me! What am I?
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The wealthy industrialist, Andrew Carnegie, was once removed from a London tram because he lacked the money needed for the fare.
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"How we spend our days is, of course, how we spend our lives. " -- Annie Dillard, essayist
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CPSC Consumer Product Safety Commission
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