Wednesday, January 14, 2009
Are Insurers Next?-5
"As state insurance regulators fast-track industry proposals to cut the amount of money that life insurers must set aside for benefits, consumer groups and industry watchdogs are crying foul. The groups, which include the Consumer Federeration of America and the Center for Economic Justice, contend that the proposals to lower insurers' risk-based capital and reserve requirements and detrimental to owners of life-insurance and annuity contracts because they reduce the financial cushion life insurers have to keep on hand to ensure they can pay claims. ... Life insurers say the changes are needed because current capital and reserve requirements are redundant and overly conservative. ... The move is expected to give insurers greater flexibility at a time when the industry is being buffeted by the financial crisis. ... Under the current regulatory requirements, [Bruce Ferguson of the American Council of Life Insurers] said, insurers could be forced to sell 'fundamentally sound assets--assets they would not sell at this time--in a down market", M.P. McQueen at the WSJ, 31 December 2008.
Why do regulators want insurers to have "greater blexibility"? Ferguson make the same arguments as Citigroup's Bob Traficanti, my 17 July 2008 post: http://skepticaltexascpa.blogspot.com/2008/07/schwartzman-and-mcteer-on-accounting.html.