This makes them less vulnerable to interest risk arising from maturity transformation and liquidity risk in comparison to banks. On the other hand, insurance companies have inherent insurance risk on their liabilities. As such, insurance companies and other financial institutions including banks have different functions and risk profiles.
Collectively and in complement to one another, these various types of financial institutions perform important financial intermediation functions in the economy. There is also a similarity. In the current global financial markets, various types of financial institutions perform socially beneficial financial functions using their various distinct products. For example, options, one type of derivative instrument, are very similar to insurance.