which UNDERWRITES the risk of loss of, or damage to, personal and business assets and life and limb (life and accident insurance). Some companies specialize in one or other of these areas, but others operate in both sectors. Moreover, insurance companies issue insurance policies to cover a variety of contingencies (fire, flooding, breakage, theft, death, etc.), involving potential financial loss to policy holders or their dependents in return for regular payments of a premium. An insurance company operates by pooling risk among a large number of policy holders; premiums are based on the probability of a particular event occurring and the average financial loss associated with each. This is done by the company's actuarial staff using statistical techniques to analyse past claims. For very large insurance risks an insurance company may resort to reinsurance sharing the insurance premium with other insurers in proportion to the share of potential claim which they are prepared to accept. In addition, many insurance companies offer contractual savings schemes . Furthermore, insurance companies use the premiums they receive not only to settle day-to-day claims but also to generate additional income and profit by investing their funds in FINANCIAL SECURITIES. Their portfolios attempt to maintain a careful balance between immediate liquidity needs and longer-term investment returns. Life insurance business, in particular, because of its long-term contractual nature, is especially conducive to offering long-term investment returns to policy holders as well as the insurance company. With profit life insurance policies are now commonplace, as are unit-linked policies which are directly related to fund performance. Life insurance policies linked to the provision of MORTGAGE finance for house purchase are another innovation.