Essays on Role of Insurance in Global Financial Stability Assignment

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The paper "Role of Insurance in Global Financial Stability" is a good example of a finance and accounting assignment. The global financial crisis which began in 2007 greatly accelerated and affected many countries and companies. The crisis posed unique challenges for financial market regulators, especially insurance companies about how financial risks should be mitigated and what financial policies should be put in place to stabilize financial systems. In the United States, the severity of the events which transpired during and after the crisis has been a shock to the country’ s political and financial system.

The crisis brought to the forefront the issue of what insurance companies should do to stabilize impaired financial institutions (Eling & Schmeiser, 2010). While the financial crisis may have been primarily a banking crisis, but the solvency of the global insurance sector and the entire financial sector, in general, was severely threatened. In particular, insurance companies were affected in several diverse ways, primarily because of their heavy investments in portfolios. As a result, different views have been expressed regarding the role of the insurance sector in stabilizing the global financial system.

One of these views is that the insurance sector can stabilize the financial systems by absorbing systematic risks that pose major threats to banking institutions. While the insurance sector was not the origin of the financial crisis and did not repackage any of the subprime mortgages that led to the crisis, the insurers were major financiers of the mortgage-based financial instruments. As such, the insurance sector was in a position to rekindle market volatility through its capacity as a long-term investor. In this way, the insurance sector can act as a stabilizing sector in the financial market during moments of stress.

This research paper reviews vulnerabilities in the global financial system and what role the insurance sector can play to suppress the impact of these vulnerabilities.


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