WHY GOVERNMENT ASSIST INSURANCE

GOVERNMENT ASSISTED INSURANCEMost uncertainty concerning financial loss violate the basic criteria for its insurability. These exposure units are statistically independent or correlated. When risk assume this characteristic, diversification across exposure units in severely weakened and the resulting effect on insurance markets can be dramatic.
        Massive insured losses caused by joint and several liability, particularly severe earthquakes or hurricanes, significant global warming, terrorist or academic events could rip through the surpluses of direct insurers and re insurers to such an extent as to cause widespread failures. the resulting loss of capacity could imperil the viability of the real economy.
       The word "disaster" conjures up images of  halter-skelter events causing greater havoc and destruction. What comes to the mind is horror at what happened and one is compelled to feel sorrow for the victims of disasters. Whether it is a huge sheet of water ripping house after house, or a great earthquake or a space shuttle being blown to bits, each has a unique gory memory.
     when one thinks of disasters, it naturally cross one's mind that if only it had been averted. Disasters are by their own very way unpredictable and happens in spite of the best effort to avoid it. It appears to be so sudden and unavoidable that one attributes it to fate. This is what makes disaster remarkable and larger than life. Even though all  precautions were taken, yet they happened and the sheer ferocity of their occurrence bring terror to one's heart. One's sympathy are with the victims as their death could only be due to chance occurrence. It is hard to believe that except for a  chance event of their being a part of their disaster, they might very well be alive.
      All governments provide some forms of insurance. They provide insurance against those risks that are not readily diversiable, primarily catastrophic exposures and against risks that are not otherwise adequately covered by the private insurance markets. These includes fundamental risk exposures, social insurance programmes (providing disability, unemployment, health retirement, and survivor benefits), environmental exposure, political risk, radioactive contamination, crop insurance and systemic risks with the consequences of externalities that result in ruins and cascading effects.
     Economists note that certain aspects of the risks lead to demand for government involvement. These are externalities and public goods. The government may be expected to intervene to direct the costs of goods and services to the appropriate parties in an equitable and sustainable basis.
     Fundamental risks normally evoke some form of government involvement. The public sector may become involved with the financing of catastrophic loss events. Government may act as a re insurer to support direct insurance market or may become direct insurers in severe cases. In addition, government normally provides emergency funding to deal  with the immediate financial problems of the catastrophic event and plays a key role in disaster management to minimize loss to life and damage to property.
        Because of its importance to the public and social pressures, government insurance plans are intended to be self-supporting and will supply funds in terms of financial distress. These programmes are funded defacto or dejure by the government.
       The government insurers include the largest insurance providers in Developed Countries. They include social security provisions, postal service insurance on parcel post and registered mail shipments, mortgage and property management loan insurance under the National Housing Scheme, Nuclear energy liability protection, war risk marine binders, the Export and Import Bank on insolvency due to political risks, direct crime insurance, securities investors insurance against insolvencies of brokerage houses, terrorism, kidnapping and fundamental risks. there are several types of government credit insurance programmes. The well known being the Deposit Insurance Programme. The Deposit Insurance Corporation insures accounts held in insured financial institutions particularly Banks. There also exists some climes cash loan credit insurance. government agencies (the Veteran Administration and Small Business Administration) sponsored programmes to insure cash loans made by banks to individuals and certain business enterprises that cannot obtain credit from other sources. A very popular government credit programme is the  one that insures long term loans made to property owners. The Federal Housing Administration and Veterans Administration are the two best known agencies in the area of credit insurance