Sunday, December 16, 2018
'The Insurance Companies and the Crisis\r'
'In developed countries the size of the indemnity commercialise place is ab protrude eight to twelve percent of the GDP. In the United States the assets managed by the indemnity welkin argon higher than the assets of the banking sector. This is ace of the just roughly of the essence(p) anchor of the economy and pecuniary system. At the macroeconomic chief of view, level of policy ext end ups the monetary stability of the economy, pore uncertainty by enabling effective run a risk management, and support economic activity and stimulate nest egg and investment. amends policy sector allow for excessively increase the skill of the entire pecuniary sector by trim 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 spheric financial crisis, the economy is experiencing a truly grueling time. The insurance indus render as well did non avoid the problems. Lack of access to deposited funds in the banks, insurance premium reduction or increase in number of claims, insistence the insurance companies to a very difficult ch allenge Ã¢â¬ how to carry out current activities and pay due compensation? more insurers began to lose its liquidity. damages industry as one of the few propped the financial crisis at the beginning. Insurers constantly were expanding their whirl Ã¢â¬ not totally just for individuals but also for business companies, and were continuing decreasing the prices for invigoration 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 conflicting funding, weakening the financial event of enterprises caused speedy declination of the global economy and have had an clashing on t he financial performance of the insurance sector. Any disturbances in the banking sector directly arrogateed the financial results of the insurers. Insurance companies seek to visualize that activities argon safe, profitable, and enable timely payment of engagements.Insurers do not give up the cash investments into sh ares quoted on a regulated market, which flowerpot provide significantly higher returns than investments into safe securities. On the background of European insurersÃ¢â¬â¢ investment exposure in 2007 and 2008 can be generalized that the nearly important start 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 assure 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 indivi dual insurance company. As an ex adenylic acidle of big problems on insurance market during crisis I would like to use IG case. The rapid fall in the share price and unequal liquidity led to lower ratings of AIG by the four major rating agencies including Standard & Poors and Moodys Investors Service. Standard & Poors lowered make headway for two levels because of less flexibility in meridian funds for additional collateral for the loans, and concerns nigh the growth losses.Similarly, preserved Moody agency, which downgraded AIG for 2 degrees as well. It is make believe that the company has liquidity problems. In the first 3 quarters of 2008, AIG Group lost 18. 5 meg of dollars. Poor results and poor ratings of AIG could cause problems to raise the nifty needed to rescue the company. The company asked Central coast for help. Finally, the organisation and the Fed did not committed to the dip of a company in which millions of Americans are check and agree d 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 exchange for a nearly 80 percent. shares has been approved in family 2008. In case of problems with the implementation of the obligations of the insurer, a domino effect could embrace the whole world, AIG bankruptcy would affect banks and investment funds, which are the chief(prenominal) holders of debt securities. In addition, AIG was a major seller of credit default swaps. bankruptcy of the AIG could force financial institutions in the USA, Europe and Asia (that bought these swaps) to account losses.FedÃ¢â¬â¢s decision made was based on the law given to it by the passed bill about the Federal Reserve. It allows the central bank to lend currency to companies outside the banking sector under unusual and pressing circumstances. In the agreement, Treasury Secretary Henry Paulson forced resignation of current AIG President Robe rt Willumstada, which was replaced by Edward Libby. In case of Poland, Insurance market were rapidly exploitation for few years before the crisis. The history of life insurance in Poland cover a goal of about 130 years.The maturation of life insurance in the first place was associated with an increase in wealth of the society. With the increase in GDP, which is a separate determinant of economic status of the country, increased the usance on life insurance. In graduate conditions the development of insurance occurred in the nineteenth century. The first smooth out insurance company was established in the Austrian partition and it was a Krakow Mutual Insurance parliamentary procedure founded in 1868 in Krakow ( as the name suggests), which a year later began conducting life insurance business.It functioned on principles similar to todays common insurance companies. In Poland we could let out the dynamic growth on the insurance market during last years, both in terms of the companies swan of products offered and collected contributions. Privatization, further market openings, the adjustment edge of the integration with the European Union, and above all the impact of the launched in 1999 pension reform, the insurance sector are making one of the most promising sectors of the Polish economy.During recent crisis in Poland for recitation, were noted some main decision-making direction changes in investment policy insurance: * Repeat Ã¢â¬Å"opening upÃ¢â¬Â of invigoration Insurance Companies to invest funds in real estate. * renunciation invest their assets in investment certificates different than in the open and closed funds * Disposal of all bonds of the institutions belonging to countries outside the European Union (For Life Insurance Companies). In the current crisis in financial markets, insurance sales, as well as some other products and services, has become practically more difficult than before.Customers are afraid to invest in financial products and very care integraly take the decision of purchasing. There is development consensus that this crisis will survive only the trounce sellers. The best sellers are those who see long benefits of building and maintaining long-wearing family relationships between insurer and customer. Such a relationship should be based mainly on mutual trust and benefit for both parties. It is crucial to unceasingly monitor changes in customer needs and proposing solutions to it, which will bring real benefits to it.The todayÃ¢â¬â¢s immanent problem of insurance companies is that insurance companies reward their brokers primarily for acquiring new customers. In life insurance commissions for the following years of the contract are much(prenominal) lower than thus for the first year. This is obviously the most reasonable in todays market situation, but the other side is that such system makes that the actor is much more absorbed in gaining new customers and does not think about the m in the category of long-term relationships. This carries a risk of decline in the gauge of sales and customer satisfaction.Another issue is the differences in the range of commission between the products. If the agent is concentrated primarily in the fact to sell a especial(a) product, which has a better profit, it is likely that the actual realisation of customer needs in this area is not a priority for him. Usually it will try to persuade the customer to buy through the pressure and the use of different types of manipulation. But do not forget that the customer who bought life insurance, trust bestowed on both the agent and the company and the contracts are renewable every year. The customer is also a source of new contacts.The customer is more satisfied with the barter for and maintenance, including a greater number of friends to recommend an agent and company. An interesting issue in my opinion is that in Poland close to thirteen thousand of entrepreneurs in the 2008 has opted to temporarily withdraw from the movement of the vehicle. * Ã¢â¬ËFor many of us is the only chance of surviving the crisisÃ¢â¬â¢ Ã¢â¬ explains Jan Kazulski, Wroclaw Transport Association The government not only allowed to the use of temporary de-registration of the car on a larger scale, but released from the obligation to pay by this time a full OC.This is the way how they are trying to deal with the crisis. At the adopted amendments will lose more believably insurance companies. Government explains that option of a recall of contributions for the period in which the vehicle is temporarily travel from service, is already operating in several countries in Europe. The insurance sector in the economy plays a very important role, apart from this obvious, that is protective, contributes to the accumulation of large(p) in the economy. Accumulation of capital in most concerns life insurance.In case of Poland, despite the current financial crisis, the insurance market in Pol and will grow. The ill-use of growth will be slower than in the past years, and customer requirements in terms of character sales and after-sales services will increase considerably. Summing up, the financial crisis had a significant impact on insurers. For example the insurance on Polish market has declined for about 22. 33 percent. Its value has declined by almost 9 billion zlotys Ã¢â¬ from 39 billion zlotys in 2008 to more or less over 30 billion zlotys at the end of 2009.The record level of disbursements included both space insurance and life insurance policies.Bibliography: * Gazeta Ubezpieczeniowa (Articles from Jan and Feb 2009) * Gazeta Wyborcza Ã¢â¬ËRekordowa strata AIGÃ¢â¬â¢, ToP, AFP, 2009-03-02 * http://www. quotes-r-us. org/home-insurance/current-financial-crisis-and-insurance-companies * http://articles. latimes. com/2009/mar/30/nation/na-aig30 * Yahoo! Finance, as of October 23, 2008. * Robert P. Hartwig, Ph. D. , Insurance knowledge Institute, Ã¢â¬Å"2008Ã¢ â¬First Half Results,Ã¢â¬Â September 30, 2008.\r\n'