Thursday , October 29 2020
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Ask not what the economy can do for insurers – ask what insurers can do for the economy

Summary:
Anna Sweeney, Executive Director, Insurance Supervision Division at Bank of England in this speech brings back the famous JFK words: ask not what your country can do for you — ask what you can do for your country. She highlights how despite the economic crisis, insurance sector is quite suited to help the economy: I began these remarks by highlighting three things that insurers do for the wider economy: Provide protection for significant financial losses; Channel investment into a wide range of assets; and Provide security of retirement income in the form of savings and annuities, facilitating stable demand for goods and services. On the first, there is a critical role for insurers to adapt and ensure they are able to meet customers’ insurance needs, particularly during the transition

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Anna Sweeney, Executive Director, Insurance Supervision Division at Bank of England in this speech brings back the famous JFK words: ask not what your country can do for you — ask what you can do for your country.

She highlights how despite the economic crisis, insurance sector is quite suited to help the economy:

I began these remarks by highlighting three things that insurers do for the wider economy:

  • Provide protection for significant financial losses;
  • Channel investment into a wide range of assets; and
  • Provide security of retirement income in the form of savings and annuities, facilitating stable demand for goods and services.

On the first, there is a critical role for insurers to adapt and ensure they are able to meet customers’ insurance needs, particularly during the transition out of the crisis and also into the longer term. Firms should take early steps to assess what this could mean for their current business models. It would be in no one’s
interests for the experience of the Covid-19 crisis and responsiveness of business interruption cover to reduce consumer confidence in the value provided by insurance for financial protection.

In the life insurance sector there is an opportunity for firms to leverage their position as long-term investors in a wide range of assets and productive investment, to support our economic recovery but this must not come at the expense of policyholder protection and the provision of secure retirement income. We would expect to preserve the current, adequate level of capital in the sector whilst seeking to reduce complexity and frictional costs within the regime.

A financially resilient, competitive and productive insurance sector not only ensures that individual policyholders are protected, but signals an industry that is able to support the recovery of the wider economy whilst maintaining high prudential standards.

Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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