Question 6

1. Do life and general insurance companies have different uses of funds? If so, explain how they differ and what the reasons for this difference are. If not, explain how life and general insurance providers invest their funds.
2. Explain the rationale behind capital adequacy requirements underpinning the Basel III accord. What is their purpose, and how do they restrict the operations of banks. In your answer use a hypothetical example to show how capital adequacy standards work in an Australian setting. Please ensure that your answer is succinct and to the point, and be mindful of the word limit for the exam.