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🏛️ '''Bailout''' refers to an extraordinary financial rescue — typically by a government or a consortium of institutions — that prevents an insurer, reinsurer, or insurance-linked financial entity from collapsing, and in doing so protects [[Definition:Policyholder | policyholders]], counterparties, and the broader financial system from cascading losses. The insurance industry's most prominent bailout episode was the U.S. government's 2008 intervention in [[Definition:American International Group (AIG) | AIG]], which received roughly $182 billion in federal support after its [[Definition:Financial Products | financial products]] division's massive exposure to [[Definition:Credit default swap (CDS) | credit default swaps]] threatened global financial stability. While bailouts are rare in insurance compared to banking, the AIG episode demonstrated that interconnected insurance groups can pose [[Definition:Systemic risk | systemic risk]] significant enough to compel sovereign intervention.

🔧 Bailouts in the insurance sector typically involve direct capital injections, government-backed credit facilities, or the assumption of troubled liabilities into a state-controlled entity. In exchange, the rescued company usually surrenders equity stakes, replaces management, and submits to enhanced regulatory oversight. Following the 2008 financial crisis, global regulators responded by strengthening prudential frameworks designed to reduce the likelihood that bailouts would ever be needed again. The [[Definition:International Association of Insurance Supervisors (IAIS) | IAIS]] developed the [[Definition:Global systemically important insurer (G-SII) | G-SII]] designation and accompanying policy measures, while jurisdictional regimes such as [[Definition:Solvency II | Solvency II]] in Europe and the [[Definition:Risk-based capital (RBC) | risk-based capital]] framework in the United States tightened [[Definition:Capital adequacy | capital adequacy]] and [[Definition:Enterprise risk management (ERM) | enterprise risk management]] standards to catch deteriorating solvency earlier.

💡 The lasting significance of bailouts for the insurance industry extends well beyond the immediate rescue. The AIG episode reshaped how regulators think about [[Definition:Group supervision | group supervision]], [[Definition:Interconnectedness | interconnectedness]], and non-traditional insurance activities. It accelerated the global push toward [[Definition:Recovery and resolution planning | recovery and resolution planning]], requiring major insurers to demonstrate that they can be wound down or restructured without taxpayer support. In markets from the United States to the European Union to Japan, the political and regulatory consensus has moved firmly toward ensuring that insurance groups maintain sufficient loss-absorbing capacity on their own, making the prospect of future bailouts both less likely and far more politically costly.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Systemic risk]]
* [[Definition:American International Group (AIG)]]
* [[Definition:Recovery and resolution planning]]
* [[Definition:Solvency II]]
* [[Definition:Global systemically important insurer (G-SII)]]
* [[Definition:Capital adequacy]]
{{Div col end}}

Definition:Bailout - Revision history

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