Rule (2001) identifies that the growing relationship between the insurance sector and the other financial sector signifies the possible role of insurance in the overall economic growth of any country. This is evident from the fact that the insurance companies have increasingly been entering into the financial sector activities by involving themselves in credit default swaps and other risk pass-through vehicles. It may be noted that these activities were primarily remained as belonging to banks and capital markets. The sector can be considered similar to the banks and capital markets, as they happen to serve the needs of the business units as well as the private individuals in the function of financial intermediation. The availability of insurance enhances the confidence of the business participants and as a result, they tend to accept aggravated business risks which lead to the development and stability of the economy. The insurance companies must accept and pay claims and for this purpose. These cash generations when invested in the capital market results in the creation of more assets and hence contribute to the economic growth of the nation.

Shivangi Ojha

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