Reserves management of insurers - case of Bosnia and Herzegovina

The insurers may achieve additional earnings by investing reserves assets, which implies additional stimulation effect for economic growth. The insurers have reserves assets available in several forms and they can use them for various purposes. These assets can be directed to different forms of investments, depending on the development level of the financial market and time periods in which they are available to the insurers. In this paper, the attention will be paid to specificity of reserves management of the insurers taking into consideration their structure and performance of various forms of investments. In this matter, it should not neglect the limitations stipulated by the laws and bylaws, which are describing the limitations in detail for certain forms of investments in respect of level of reserves which insurer needs to have in order not to jeopardize its solvency. Therefore, it is very important to take into consideration the time periods of availability for certain categories of assets, i.e. time periods in which it is expected to have the payments of claims for signed insurance contracts, and insurers have to adjust their policy of reserves investments to these periods. A significant factor for defining the investment policy is also represented by the level of financial market development, i.e. available forms of investments and their specificities. Financial markets of transition countries are characterized by low level of development of financial market in width as well as in depth, and, therefore, insurers have significantly lower number of possible alternatives for investments. That is especially noticeable on the insurance market in Bosnia and Herzegovina which, besides that it has unusual regulatory system, also has undeveloped financial market. For this purpose, the focus of this paper will be on the problem of investing the reserves of insurers on the market of Bosnia and Herzegovina, taking into consideration the present legal regulations from area of insurance.