Economic ResearchPublicationsResearch Papersinsurance_markets: The economic value of security

The economic value of security

Service & Contacts

Dr. Lorenz Weimann

Allianz SE
Phone +49.69.24431-3737
Fax +49.69.24431-6791

Send email

Receive the latest Allianz news and information about upcoming events.

Newsletter

Follow Economic Research on Twitter

More

  • Contact

  • Newsletter

  • Social Media

Security is a fundamental human need, second in importance only to physiological needs such as the consumption of food. While security has considerable individual value, it is also worth a lot in business and economic terms. Let us examine this dimension of security in greater detail.

Allianz SE
Munich, Dec 12, 2016

From an entrepreneurial point of view, security always entails the limitation of risks – and these days risks are frequently equated with the incurrence of losses.

Buildings insurance, for instance, protects against pure financial loss in the event of damage caused by fire or storm, life insurance secures the livelihood of the policyholder's offspring and liability insurance acts as buffer against damage incurred by third parties as a result of accidents or similar incidents.

Equally, a great deal of importance is attached to the possibility of limiting damage in the economy. It's unlikely that anyone would still want to invest their capital in airline or ship operations, chemical or energy production if they were unable to take out insurance against the risks posed by the weather, accidents or attacks, all of which are capable of obliterating said capital in its entirety.

Insurance companies and the security industry work to try and minimize the risk of loss. Risk management means taking precautions with a twofold aim: firstly, to minimize the likelihood of a loss event, secondly, to minimize the extent of loss should said event occur anyway. The better the safety precautions a company or a household takes, the less it will have to fork out for insurance premiums. In other words, insurance provides an incentive to avoid risks, thus fulfilling another vital economic function