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Does the insurance sector need a cash injection?

As the headlines point to a massive bailout of the UK banking sector there are some in the market who believe that a similar solution may be required for the insurance sector. Unknown to many consumers in the UK, insurance companies invest their premium income across a massive range of investment groups and are sure to have taken large hits to their asset bases like all other UK financial companies. But do they need financial help?

The true extent of problems in the insurance market may take some time to show up but the AIG situation in America shows that the sector is not immune from trouble. As and when insurance claims start to roll in, as they always do when the economy takes a downwards turn, we should then start to see any liquidity issues come to the surface.

It is interesting that there have been no comments or forecasts from the main insurance companies in the UK but is the silencing deafening or a sign of strength?

What we have learnt over the last couple of months is that no company and no sector is immune from the downturn and those who believe they are immune are probably set to receive major shocks in the short to medium term.

You can have the strongest business in the world but it is the strength of your industry which is paramount. The failure of a competitor, in whatever shape or form, can and has been shown to spread like a cancer and touch all areas of the relevant industry and beyond.

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