In developed countries the size of the insurance market is about eight to twelve percent of the GDP. In the United States the assets managed by the insurance sector are higher than the assets of the banking sector. This is one of the most important pillar of the economy and financial system. At the macroeconomic point of view, level of insurance increases the financial stability of the economy, reduce uncertainty by enabling effective risk management, and support economic activity and stimulate savings and investment. Insurance sector will also increase the efficiency of the entire financial sector by reducing transaction costs, creating liquidity and economies of scale. A modern, well-functioning insurance sector is essential for achieving sustainable economic growth. With the advent of the global financial crisis, the economy is experiencing a very hard time. The insurance industry as well did not avoid the problems. Lack of access to deposited funds in the banks, insurance premium reduction or increase in number of claims, forced the insurance companies to a very difficult challenge - how to carry out current activities and pay due compensation? Many insurers began to lose its liquidity. Insurance industry as one of the few propped the financial crisis at the beginning. Insurers constantly were expanding their offer - not only just for individuals but also for business companies, and were continuing decreasing the prices for life insurance. However, it does not apply to all types of the services provided by insurance companies to entrepreneurs. Finally end of 2007 and 2008 have been rich in events associated with insurance sector. Fall in the stock market, the limitations and difficulties in accessing foreign funding, weakening the financial situation of enterprises caused rapid deterioration of the global economy and have had an impact on the financial performance of the insurance sector. Any disturbances in the banking sector directly affected the financial results of the insurers. Insurance companies seek to ensure that activities are safe, profitable, and enable timely payment of obligations. Insurers do not give up the cash investments into shares quoted on a regulated market, which can provide significantly higher returns than investments into safe securities. On the background of European insurers’ investment exposure in 2007 and 2008 can be generalized that the most important source of losses for the insurers have proved their investments in debt securities CDOs SPV securitization companies, which face insolvency. These companies has completely lost its value and the guarantee of the solvency. After the collapse of SPV companies, liabilities took over the insurance sector. The situation of the insurance sector in 2008 were gradually deteriorating as well as the solvency ratios of individual insurance company.
As an example of big problems on insurance market during crisis I would like to use IG case. The rapid fall in the share price and unsatisfactory liquidity led to lower ratings of AIG by the four major rating agencies including Standard & Poor's and Moody's Investors Service. Standard & Poor's lowered scores for two levels because of less flexibility in raising funds for additional collateral for the loans, and concerns about the growing losses. Similarly, preserved Moody agency, which downgraded AIG for 2 degrees as well. It is clear that the company has liquidity problems. In the first three quarters of 2008, AIG Group lost 18.5 billion of dollars. Poor results and poor ratings of AIG could cause problems to raise the capital needed to rescue the company. The company asked Central Bank for help. Finally, the government and the Fed did not committed to the downfall of a company in which millions of Americans are insured and agreed to give to AIG financial assistance. The transaction for a two-year revolving credit for 85 billion dollars to ensure the liquidity of the AIG company in...
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