This indicates the ease and speed with which an investment can be converted to cash. For example, a short-term Treasury bill is very liquid, but a real-estate investment (such as selling a building or property) is not as liquid. Liquidity is important to an insurance company since it needs cash to pay policy benefits. Low liquidity can result in losses if a company is forced to sell assets at the wrong time to cover cash outflow.
June 23, 2011