Effect of Financial Crisis on Insurance Business

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Banking & Insurance
Effect of Financial Crisis on Insurance Business

João Ferreira Leandro Barbosa Luís Leão Mikolaj Mokwinski

Index
Introduction .........................................................................................................................................3 How do insurance companies work? ...................................................................................................4 Modern financial crisis affects the activity of insurers by 3 main mechanisms ..................................6 Examples of the crisis influence on different types of insurance companies......................................6 One of the most famous examples of the collapse of the insurance company on the market...........7 How the insurance industry will change in several years ? .................................................................9 World insurance market presently.......................................................................................................9 Role of Insurance industry in a modern economy .............................................................................11 The role of insurance companies as shock absorbers in this crisis....................................................12 Risks and effects of financial crisis in different insurance services....................................................14 Mortgage insurance .......................................................................................................................14 Life Insurance .................................................................................................................................15 Financial guarantee insurance .......................................................................................................16 CONCLUSION ......................................................................................................................................18 Literature List .....................................................................................................................................20

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Introduction
The purpose of this seminar is to discover the effects of financial crisis on the insurance business and to identify some issues related to the insurance role in this financial crisis and try to understand how the insurance companies are important on this last years crisis. Insurance basically is a financial arrangement that redistributes the costs of unexpected losses. Insurance involves the transfer of potential losses to an insurance pool. The pool combines all the potential losses and then transfers the cost of the predicted losses back to those exposed. Unexpected losses can occur and the role of insurance companies is to ensure the costs of that losses , and insurance companies can predict these kind of losses and repay that losses to their customers. An insurance system redistributes the cost of losses by collecting a premium payment from every participant (insured) in the system. In exchange for the premium payment, the insurer promises to pay the insured’s claims in the event of a covered loss. We can say that the insurance system protects their costumers from financial losses by paying them back the amount of the loss. With the insurance service investors and entrepreneurs can be more confident about their business , because they have all insured, and insurance companies are always there if something jus to go wrong. The level of economic activities are determined by insurances, because if a country as a good insurance system the level of economic activities will be high because everyone is so much more confident about their business and in the end the economy will just grow ! Insurance companies affects all the areas that have goods that can be insured , so we can say that insurance companies deals with lots of different targets like Banks, Manufacturing Industry, Construction industries, people and small companies. So...
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