Insurance Firms Against Insolvency

This still did not prove to be sufficient to set the company in a stable position. The government had, therefore, to dig in deeper and provide some $150 billion. Other major insurance firms have been reporting some big losses which have been largely attributed to the ongoing financial crisis. Insurance company insolvency would result from a sudden big loss or continued losses for some time. This financial problem facing insurance companies raises the debate of what is supposed to be done when the insurance company faces the risks of insolvency. The solution to these questions lies within the control of the insurance industry.The government would be in a better position to assist the insurance firms during the financial crisis if there is a well installed financial regulation procedure which involves safety-and-soundness compliance and regulation system. This system aims at safeguarding creditors from losses that might occur due to the insolvency of insurance institutions as well as maintaining financial stability in these firms. For the insurance industry, this is carried out by the Federal Deposit Insurance Corporate (FDIC). The government has also created some other small agencies such as the insurance guaranty funds, investor protection funds and deposit insurance as an appropriate approach to protect creditors against big financial losses if there is an unavoidable circumstance of the insolvency of an insurance firm (Schweller, 2008). It’s also the obligation of the government to ensure that these firms remain solvent: that their assets’ value remains more than their liabilities as well as their liquidity: that the firms can meet requests for payments in terms of insurance claims if presented. The state should also see to it the solvency regulation is strictly put in place by employing examiners who are charged with the responsibility of assessing the value of a firm’s assets and examining its scope ofliabilities.

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