The Financial Crisis: Consequences for Insurers

René Doff

Between 2007 and 2010, the financial world faced a type of crisis that had not been seen for a very long time. Some say that only the great crash of 1929 and its aftermath was worse. Although it is unclear when exactly the global financial crisis started, the most visible events were the collapse of big global investment banks that had been the cornerstone of Wall Street for many years. Bear Stearns, Lehman Brothers, Merrill Lynch, all were transformed in a matter of weeks during 2008. These collapses brought massive media attention, and exposed a series of underlying phenomena that were already underway during the entire first decade of the 2000s.

Much has already been said and written about this financial crisis. However, this chapter will give a very short summary of the crisis itself, before looking at its implications for insurance companies, before discussing some of the lessons learned.

THE CRISIS: A BRIEF SYNOPSIS

The credit crisis started as a subprime crisis when specific groups of homeowners in the US could no longer afford their interest payment and amortisation due to increasing interest rates. These so-called subprime mortgages, sold to groups of homeowners