The insurance industry alleviates poverty, improves market liquidity and contributes to economic growth, according to international insurance think tank the Geneva Association.

There is a circular relationship between insurance market size and economic growth, particularly regarding life insurance in developed countries, it says in a report. It cites a World Bank study showing insurance market activity contributes to economic growth.

In the context of sovereign debt issues and increased health and social welfare spending in advanced economies, the association sees a role for insurance.

“There is room for task-sharing between private and social insurance,” the report says.

The industry can help reduce health risk by offering alternate and additional coverage to public plans and by encouraging prevention and emphasising rehabilitation.

Public pension systems are increasingly unable to support the elderly and insurance can be a key contributor in helping manage private savings for retirement.

The industry’s long-term investments in job-creating projects help alleviate poverty and create new asset classes, the association says. The effect is noticeable in developing countries, where life insurance assets provide the basis for investment in projects such as infrastructure.

“Indeed, emerging-market infrastructure investment represents a potentially important new asset class that can generate reliable, long-term income and serve to pay the pensions of rapidly ageing populations,” the report says.

Since 2008 banks have reduced purchases of bonds and securities and pulled back from longer-term financing. Meanwhile, insurers have helped improve market liquidity by providing additional sources of funds, the association says.

Because of this, it is “particularly worrying” that the new European regulatory framework Solvency II may base capital requirements on the wrong assumption that industry conditions today are similar to those pre-2008.

“This risks pushing out insurers at a time when banks are far more reluctant to buy bonds and Europe is starved for credit,” the report says.