Friday, February 13, 2009

Are Insurers Next?-6

"State insurance regulators voted down a package of proposals to ease reserve and capital requirements for life-insurance products, after the move came into a firestorm of criticism from consumer advocates. ... In recent weeks, the NAIC encountered criticism from consumer-advocacy groups charging it was unnnecessarily rushing to ease rules that would hurt owners of life-insurance policies and auuniities. The groups, which included the Consumer Federation of America and the Center for Economic Justice, maintained the changes would reduce the financial cushion that life isurers had to keep on hand to pay claims. A trade group of life insurers, an actuarial firm and at least two credit-ratings firms have maintained that many of the changes make economic sense. They said that some of the rules in question are overly conservative and, in some cases, redundant. ... 'So far, the insurance industry is in much better shape than most of the rest of the financial-services sector because of strong state solvency regulations', said Roger Sevigny, NAIC president and New Hampshire insurance commissioner", my emphasis, Leslie Schism at the WSJ, 30 January 2009.

That seals it. Two of the ratings agencies said the proposed changes are OK, therefore, they must be fine. What idiots run the insurers! They actually hired ratings agencies to lobby for the rules changes. Who at the agencies said the proposed changes are OK? Yuri Yoshizawa, my 17 June 2008 post, link: http://skepticaltexascpa.blogspot.com/2008/06/monolines-are-dead-rating-agencies.html.

4 comments:

kuato said...

We're freaking doomed!

Anonymous said...

Right on for the consumer advocates... glad someone is watching the insurers...

And credit raters testifying about capital adequacy to regulators? Interesting... any chance that it was AM Best? Or just old Moody's and S&P?

You ask "What idiots run the insurers!"(?)... silly question... look at AIG's ex Greenberg... nuff said!

Anonymous said...

Insurers (and pension plans?) are being cooked right now. The drop in the stock market along with their "balanced" investment plans are pushing them into bonds. Once the dollar craters they will be toast.

PS: There's no reason here, how can anyone expect to come out whole with bonds paying in single digits with double digit inflation?

Independent Accountant said...

Anonymous:
No argument here. I have long said unlike the 1930s, with the Dow falling 89% from 1929-32, expect the real bear market to be in bonds. For those old enough to remember, in 1981, 30-year Treasurys yielded 14%. I expect at the next cyclical peak, they will go higher. Perhaps by a large margin. 20-25% 30-year T-bonds by 2017? Maybe.