Monday, 26 January 2015

Insurance Companies and Economic Crisis

The insurance sector overall does not appear to end up being threatened by the financial crisis. Nonetheless, insurance companies are actually affected, and in mostly unfavorable ways. In this context, a number of concentrated exposures to credit and market risks are actually revealed, including the following versions:

• Mortgage insurers in the us have been at the epicentre in the crisis and have been tough hit. Their financial health is essentially determined by housing market along with foreclosure developments, which are not expected to improve rapidly.

• Life insurance agencies, especially in the United Says, have come under significant market valuation pressures, as investment cutbacks rose, while the costs connected with hedging to limit the problem of equity-based contracts with confirmed returns spiked.

• Financial guarantee insurance agencies have been under rating and market pricing pressures and the large entities have lost his or her triple-A rating status, which was the core of their business model.

• Some big insurance–dominated financial groupsD 7 Deborah were affected either through his or her institutional links to banks or maybe their in-house units performing investment-bank-like actions. For example, the world’s largest insurance group collapsed caused by losses incurred through its personal product unit, which had been a major seller of credit protection. The government extended parts of its financial back-up to this financial group, as its role being a counterparty to systemically important banks seems to have made this company per se systemically important.


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