Investment, PMI, and Insurance Companies in the Financial Crisis

The financial crisis of 2008 had a significant impact on insurance companies, particularly those with diversified business models. While the trigger of the crisis lay in the US mortgage market and subsequent failure of credit default swaps (CDS), the far-reaching effects on market volatility and investment portfolios had a negative impact on insurance companies. The crisis revealed that insurance companies were not immune to liquidity risks and may have to witness liquidity crises more than what their risk management models had factored. It also highlighted the importance of a well-functioning internal control system, corporate governance, and risk management in these companies.