Using insurance funds for development

Large funds are under the custody of insurers and are invested to produce additional returns. Under competitive pressure this additional income may enable the insurer to charge lower rates than would be usual when based on pure underwriting experience or it may improve the insurer's overall profitability. The management of these funds is thus very important both to insurers and those insured, and may also play a significant role in the national economy. Appropriate regulations to channel these funds so as to target developmental areas of the economy may contribute to the overall economic development of the country. This issue has often been raised in connection with developing countries where investment money is often scarce and where funds held by insurers could be used for development purposes. However, it has been argued that imposition of strict investment rules may interfere with insurers' ability to maintain the necessary levels of liquidity and security in their investment portfolios. Such provisions may also deprive companies of investment possibilities yielding higher returns.
Facilitated by:
Regulating insurance
Type Classification:
D: Detailed strategies