Life Insurance Companies Lobbying for Lower Reservering Requirements

By | January 23, 2009

washingtonpost.comThe Washington Post
Life Insurers Seek Lower Cash Cushions –

The current economic collapse is knocking on the door of the life insurance industry.   The powerful industry group ACLI “American Council of Life Insurers” is pushing regulators to let them operate without having to reserve so much to basically make sure claims are covered. 

Two thoughts here, First do we want the life insurance carriers to not have to put away so much in reserve to make sure they can pay death claims or annuity payments?  Second if we don’t let them loosen the requirements how many Life Carriers could we possibly see crumble with the likes of AIG, Citigroup etc.? 

Personally I’m torn, definitely don’t want less reserving but at the same time really don’t want to see any more companies go belly up. 

Here are some snippets from the article…

To the list of industries seeking government relief, add another: life insurance.

Battered by the financial crisis, life insurers are urging regulators to let them operate with thinner financial cushions — the capital they must hold to absorb financial shocks and cover their obligations to policyholders.

“When the insurance industry’s financial statements begin to be released . . . there will be an awful lot of publicity on . . . what’s happened in the industry. And there is a risk that policyholders in this economic environment can misinterpret some of the headlines,” ACLI’s chief actuary, Paul Graham, said.

Like banks and other financial institutions, life insurance companies are required to maintain prescribed levels of capital.

The insurance industry ended 2007 with about four times the amount of
capital that state regulators require. The ACLI expects that the ratio
may have dropped to 3 or 3.25 times the required level by the end of
2008, Graham said. As recently as 2002, the level was 3.25.

One thought on “Life Insurance Companies Lobbying for Lower Reservering Requirements

  1. Pingback: Loosening the Reserving Requirements for Life Insurance Companies | The Life Insurance Pro

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