Insurance News
In Spite Of The Fact That The Recession Is Causing Problems It Appears That That There Is Still An Opportunity For Improvements To Occur
Six months since their U.S. Treasury told insurance companies to purchase banks in order to be eligible for federal bailout money, these same insurance carriers are still waiting for the funding.
$328 billion of the $700 billion financial rescue fund, as of March 31, had already been disappeared by the Treasury. Regardless of the fact that they have been dispersed, none of it has gone to the life insurers who maintain thrift functions that in past years have been applied for receiving the money.
Regardless of the fact that the Trouble Assets Relief Program is essentially focused on helping fiscal institutions, it is still allowed for insurance firms to participate in the Capital Purchase Program if they can attest to having a bank within their assets.
Upon then-Treasury Secretary Henry Paulson’s instruction, by the end of 2008, several insurers went bank shopping. For example, Lincoln National agreed to purchase Newton County Loan & Savings FSB while at the same time, Genworth Financial said it would agreed to buy InterBank FSB which is at located in Maple Grove. At the same time, Hartford Financial Services Group agreed on a deal to purchase Federal Trust Corp.
Regardless of the fact that the Treasury is estimating that it will make available at least $218 billion more in capital to banks, up until now, the agency taken no action on the still pending requests of insurance companies. There are even some media sources that have reported that under the Obama Administration the U.S. Treasury has yet to make any decisions about providing insurers with access.
Rep. Melissa Bean, D-Ill., presented the suggest that carriers that have not been able to get traction do so on their requests in as much as they do not have a federal presence in the form of a regulator, when the Insurance Reform Summit took place on March 5, in Washington, D.C. On April 2nd she presented a bill that she had co-sponsored with the goal of establishing an optional federal charter. Her bill would create not only a federal regulator but also a systemic regulator that would act to supervise the federal and state systems.
At the same time that the carriers are awaiting word from the Treasury, their profits, stock prices and sometimes their ratings have been suffering.
There has also been a suffering on the part of Hartford Financial Services, while its application languished. This same carrier reported an $806 million loss for 2008 after having posted a $595 million profit for the previous year. It was in March that the company’s financial ranking was assigned a series of downgrades from rating agencies, which are in the position to inflict what might be considered considerable damage to the brand.
Prudential Financial already carries bank status. Its application declined significantly in 2008 when compared with the value of its vast investment portfolios. After that Prudential announced a record fourth-quarter loss of $1.64 billion.
It is expected by the American Council of Life Insurers (ACLI) that the Treasury will settle the issue before the end of the month. It is still admitted however, that it was not sure which way the Treasury would go. But a yet earlier statement by the ACLI announced that the life insurance industry remains in a good position to withstand the crisis and in fact to continue its proud tradition of honoring its ongoing obligations to policyholders.
