Could Life Insurance Carriers be the next Industry in Trouble?

By | February 6, 2009

Are Life Insurance Companies Next To Fall?

There has been some talk about the Life Insurance carriers the next financial sector to see some trouble due to the economic downturn.  This is a very informative article on the topic which describes what could possibly happen…

As we watch banks fail and beg for government aid, problems in another important financing services sector could be getting overlooked. With everyone already losing sleep from worrying about the status of their retirement accounts or even their jobs, the last thing they need to worry about is the status of their life insurance coverage. After all, we get life insurance coverage so we don’t lose sleep thinking about how our family will manage if we die. The fact that the insurance industry is now lobbying the government for help is not a good sign, though.

Many of the big life insurance companies have been in business for a long time—more than a hundred years in some cases. They have managed to make it through numerous recessions and even the Great Depression. What is it then about today’s economy that is putting some companies in such dire straits? The answer lies in the investments being made by the companies in question. One of the biggest concerns for insurance companies right now is that they have a lot of outstanding guaranteed annuity contracts. That means that regardless of how the market performs, they are still required to pay out a set percentage rate to the contract holder. The problem of course is that returns aren’t very easy to come by in today’s marketplace.

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