Insurance and Trade in Services

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Insurance and Trade in Services
The international character of insurance services relating to goods in
international trade is not a recent phenomena. Transit-transport insurance as
well as export credit insurance is often historically connected
 with the pattern of
international trade. The protectionism which has developed in almost all
countries should be viewed as a decision to produce internal insurance services
as opposed to importing these services. In developing countries, insurance was
considered a macroeconomic tool and as such used by many governments to
produce not only insurance services but also social and macreconomic
objectives.
The development of multinational operations has resulted in increasing
demand for international insurance coverage. The ever increasing number, size
and complexity of risks insured has enhanced the trend for international
expertise and diversification. Political, legal and cultural environment as well as
economic conditions are factors creating barriers and problems in international
trade. However, the majority of insurable risks are purely domestic in scope and
international insurance transactions on these risks, whether or not they are in
fact prohibited or subject to a kind of tariff protection, are unlikely to be on a
large scale.
The Balance of Payments
Concern about the balance of payments has been an important factor
determining the use of restrictions on trade and exchange controls by practically
all soft-currency countries, and by some hard-currency countries as well.
Insurance activities give rise to a number of commercial and financial
transactions with foreign countries (payment of premiums, settlement of claims,
movements of capital and investment income) which do not necessarily relate to
the same financial year. Only by taking into account the present net value of
insurance inflows and outflows would it be possible to calculate the balance of
these settlements.
Progressive Liberalization
Progressive liberalization should aim at reducing discriminatory restrictions that
limit foreign participation in domestic tlI8.lkets without requiring a lower
standard of prudential regulation. Market access should provide the right to
foreign providers of insurance services to enter a market and to sell services
under conditions of fair competition. Transparency and non-discriminatory
application of laws and regulations are among the factors being discussed at an
international level today.
Progressive liberalization should be pursued with the fundamental objective
of growth and development of all trading partners. Many countries consider that
the existence of strong national insurance companies is an essential component
of their economic, and even of their political independence. This argument is
certainly not confined to the markets of developing countries.

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