Loosening the Reserving Requirements for Life Insurance Companies

By | January 28, 2009

Reuters UK

US insurance regulators recommend capital changes

US insurance regulators recommend capital changes | Deals | Regulatory News | Reuters

Due to the Financial Market collapse and the current credit crunch, if Life Insurers do not get financial capital requirements loosened it could make the carriers look weaker then they really are.  In a previous post I mentioned that the companies were looking to relived reserving requirements.  Already a couple of carriers AXA and Pacific Life have dropped no lapse guarantees on a couple of Universal Life products.  This is not good for consumers or the industry in our opinion, the State’s should keep an open mind, no sense to see a couple of life carriers go down in flames with the Banks.

WASHINGTON, Jan 27 (Reuters) – A group of state insurance
regulators voted on Tuesday to ask states to approve rule
changes that advocates say would ease capital requirements for
life insurers, giving the companies a boost at a time when
credit is tight.

The National Association of Insurance Commissioners (NAIC)
voted to approve several measures first suggested by the
American Council of Life Insurers (ACLI), a trade group, which
would revamp life insurers’ regulatory capital requirements to
eliminate redundancies in reserve requirements.

A vote by the full NAIC is due to take place on Thursday.

The ACLI had wanted the changes to be implemented by the
end of 2008. The changes could, based on ACLI’s estimate, free
up about $25 billion to $30 billion in capital, or up to 7
percent of life insurers total adjusted capital in 2007.

Pat Baird of the ACLI argued at an open meeting that
without the changes, insurance companies would look weaker than
they are because of tight credit.

“I can tell you that all companies are feeling the effects
of this,” he said. “The reality today is that capital market
options have all be dried up.”

Eric Dinallo, New York state’s insurance superintendent,
pushed Baird on which of the companies wanted the eased rules
and worried aloud that it would look bad to approve the changes
at a time when there is a push toward tighter financial
regulation.

“Who’s actually asking for this relief then? There’s no
company that is willing to sit … and say, ‘Yeah, it’s me, I
need the penicillin,’” he said.

“We’re here for relief for all companies,” responded
Baird.




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