Social vulnerability, insurance and risk diversification in Latin America and the Caribbean

Insurance policies are required, along with other measures, to deal with the magnitude and depth of social and economic risk in Latin America. The peculiarities of insurance markets (such as the constraints of the pricing system, the intrinsic characteristics of insurance as an economic good and its dimensions as a public good, its externalities, and risk selection with its adverse effects on equity and efficiency); justify the consolidation of stable, appropriate risk diversification and financing that is oriented by the principle of solidarity, with funding either from compulsory contributions or from the national budget. This paper conducts a critical review of the postulates of so-called social risk management, which limits State responsibilities in the area of social protection to the provision of safety nets to combat poverty, favours targeted policies over universal ones, is dismissive of solidarity in insurance and stresses the responsibility of individuals to insure themselves against risk.