Insurance is one of the major, but the least studied branches of economy. It is a financial system protecting from risks, from consequences of the unforeseen events representing threat to well-being, and sometimes and to existence of people and the enterprises. There is a number of the attributes describing specificity of insurance as an economic category - there is an objective necessity of the indemnification, losses are compensated in the monetary or natural form, etc. Studying of functions of insurance is carried out on macro and micro levels to capture both specificity of risks of separate persons and events, and influence of insurance on functioning of economy as a whole. Development of insurance products is based on a number of the principles, helping to adjust action of the insurance mechanism. The structure of the insurance market of Latvia considerably differs from other countries of the European community and the world as a whole. In the Latvian insurance market the fast gain of the signed premiums both by risk insurance, and in life insurance for the last few years is observed, and it is possible to predict, that development of the market will proceed at presence of a sharp competition. At the same time, the insurance companies will be compelled to search for all new competitive advantages since it is necessary to improve profitability in the insurance market. It inevitably means increase of the prices for services according to their real cost price and economic processes in the country.