Insurance and Economic Development II
/Extracted 30NOV2011 from http://www.zurich.com/insight/downloadlibrary/
What is the role of insurance in economic development? (2008)
Fortunately, in the past few years, several interesting lines of research have begun to map the specific contributions of insurance to the economic growth process as well as to the well-being of the poor. The evidence suggests that insurance contributes materially to economic growth by improving the investment climate and promoting a more efficient mix of activities than would be undertaken in the absence of risk management instruments. This contribution is magnified by the complementary
development of banking and other financial systems...
Insurance serves a number of valuable economic functions that are largely distinct from other types of financial intermediaries... The indemnification and risk pooling properties of insurance facilitate commercial transactions and the provision of credit by mitigating losses as well as the measurement and management of non-diversifiable risk more generally...
The management of risk is a fundamental aspect of entrepreneurial activity... Those who do not apply a structured process still make decisions about risk, although sometimes by default rather than design. The scope of an economy’s insurance market affects both the range of available alternatives and the quality of information to support decisions...