Insurance Companies Failing in 2008
The financial crisis of 2008 saw hundreds of companies fail, not least being insurance companies. Despite the trickle of information coming from the industry, it is difficult to precisely say how many insurance companies failed in 2008.
Financial Institutions Failing
The global financial crisis has been seen as one of the worst in recent history and many financial institutions have seen heavy losses. Insurance companies, along with banks and lending firms, were greatly affected by the intervention of government bailouts. The exact number of insurers affected is unknown, but some sources cite up to 15.
Fallout of the Global Crisis
The aftermath of the crisis saw many countries across the world suffer economic downturns. Unemployment figures spiralled and the insurance industry was not immune. It is believed that numerous insurance companies failed in 2008. Insurance companies failed largely due to the failure of investments, including subprime mortgages and CDOs (Collateralised Debt Obligations), as well as inadequate capital reserves.
The Total Number of Companies
To date, the total number of insurance companies that failed in the crisis is unknown, with only a handful of insurers collapsing. Many businesses have been adversely affected by the crisis, however, and a large number of insurance companies likely became insolvent as a result of paying out large amounts of claims and liabilities.
Reasons Behind the Failures
The insurance industry has been heavily impacted by the global financial crisis. Insurers failed largely due to:
- Unsustainable Investment Strategies: Many insurers were too heavily invested in risky investments, such as CDOs and subprime mortgages, leading to major losses and eventual failure.
- Inadequate Capital Reserves: Insurers were not adequately capitalized to cover large claims or liabilities.
- Excessive Leverage: Insurers took on too much debt, causing failures in the most extreme cases.
It is impossible to determine for sure how many insurance companies failed in 2008 and the true number remains unknown. However, it is clear that the global financial crisis and its ramifications had a major impact on the insurance industry.