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The private insurance sector plays a central role in a modern economic system. In this paper its two most important intermediary roles are discussed: (a) as a mechanism for risk transfer; and (b) as a means of mobilising saving and developing the capital market. Although life insurance companies and non-life insurance companies perform both roles, it is non-life insurance companies that have the more significant role as a risk intermediary, while life insurance is more important as an investment intermediary. Moreover, in the context of the economic system as a whole, these two roles are complementary. On the one hand, in order to assume risks insurance companies need to hold capital; on the other hand, the mobilisation of long-term savings and its subsequent investment provides a flow of new capital which is available to help underpin the risk absorption role. |
