Publication: Establishing Efficient and Effective Insurance Guarantee Schemes
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2023-12-14
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2023-12-14
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A well-developed efficient insurance sector plays an important role in any economy. This role is supported by effective regulation and supervision with the aim of having a sound insurance sector that is growing, offering adequate covers, contributing to employment and investment, ensuring reduced exposure to poverty, and increasing shared prosperity. These objectives go beyond merely protecting the interests of policyholders. They recognize that the insurance sector plays a much larger role in the economy, even for those who are not policyholders or beneficiaries. Failure of insurers can undermine these objectives. Failure events might best be defined broadly and from a consumer perspective rather than through a literal analysis of a legal definition. It is clear that such events could have an adverse impact on both the policyholders and beneficiaries directly involved as well as the broader market. As a result, the insurance sector maintains a high level of resilient providers with a well-developed system catering to orderly resolution. It is also noted that politics can add to the challenges of managing an insurer failure. Media and local politics can lead to significant pressure either regionally or nationally. While the normal activity of dealing with a crisis event is drawing heavily on the resources of the supervisory authorities, this additional layer of activity is usually not trivial. In some situations, political engagement is needed to secure the necessary mechanisms for resolution. Given the variety of actual situations that arise, it is often the case that politicians need to be engaged in the solution.
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“World Bank. 2023. Establishing Efficient and Effective Insurance Guarantee Schemes. © World Bank. http://hdl.handle.net/10986/40742 License: CC BY-NC 3.0 IGO.”
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