Essay on Introduction to Insurance Industry

2137 Words Jan 2nd, 2011 9 Pages
1. Introduction to the Insurance Industry
Insurance and risk management make up an immense global industry. According to a survey conducted by a leading global insurance firm, Swiss Re, worldwide insurance premiums totaled $4.270 trillion in 2008 (the latest data available), up about 6.3% from $4.061 trillion in 2007. This was equal to about 6.18% of global GDP. Global life insurance premiums were $2.79 trillion during 2007, while all other types of insurance totaled $1.78 trillion.
In America alone, the insurance business employed about 2.31 million people in 2008, and insurance gross premiums totaled $1.13 trillion, making the U.S. the world’s largest insurance market. For 2009, life, accident (including supplemental health) and
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Occasionally, insurance underwriters go broke, and firms that rate the financial stability of insurance underwriters always list more than a few that are not financially sound. For example, Yamato Life Insurance Company, a leading Japanese firm that had been in business for nearly 100 years, took bankruptcy in October 2008.
American insurance underwriters found their stocks falling sharply in 2008 when investors realized that many of these companies needed to raise new levels of capital due to losses in the firms’ reserves and investment assets. At the same time, markets were reacting to the fact that net profits can fall sharply during tough economic times. Hartford Financial raised $2.5 billion in new capital in October 2008 by selling shares to Allianz, a major German insurance firm. MetLife raised $2 billion in new capital during the same month. course, the biggest news was the U.S. government’s need to bail out global insurance giant American International Group (AIG) in the fall of 2008. AIG was considered by most analysts to be a reasonably well-managed insurance company with good long-term potential in the global market. Unfortunately, a relatively small division at AIG had taken immense risks by writing credit default swaps (CDS) totaling hundreds of billions of dollars. This is what broke the company’s back. CDS are essentially an unregulated form

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