Now Insurance Companies Can Get U.S. Taxpayer TARP Money too

The blood that keeps on bleeding. Life Insurance Companies to get TARP funds:

The U.S. Treasury said on Wednesday some life insurers have met requirements for government capital investments under an existing rescue plan, clarifying that it is not launching a new bailout for the sector.

"There are a number of life insurers that have met requirements for the Capital Purchase Program because of their bank holding company status," said Treasury spokesman Andrew Williams. "These are among the hundreds of financial institutions in the CPP pipeline that will be reviewed and funded as appropriate on a rolling basis."

The statement was made in response to a Wall Street Journal story published late on Tuesday saying the Treasury would extend its $700 billion financial bailout program to certain life insurers and would make an announcement in coming days.

The original Wall Street Journal story is here and they report it is very unclear which life insurance companies will get the money or the details.

Subject Meta: 

Forum Categories: 

What ever happened to the concept of investment

losses? Those insurance companies that are seeking help screwed up. There are still AAA-rated insurance companies out there.

Investment losses are a very good learning experience, believe me I know. It is time for bondholders and shareholders to experience losses.

Treasury doesn't understand the difference between

systemic risk and investment risk.

Now I would not normally ask this

but given how screwy things are these days, are the policies themselves safeguarded if one of these firms goes belly up?

good question

I'm assuming they could transfer the policies to some other firm since they should be solid, but I honestly don't know.

For the record

my question was of a rhetorical nature. But yes, you are right, it would get transferred. The reason I asked, was I'm hearing (on Bloomberg televions) UAW pensions may be getting slashed as much as a third. Now if they're willing to do that to pensions, what about when say an insurance company takes TARP like they're begging to do? Don't be surprised. I hope it doesn't happen, I'll be pissed as I've been paying for years and it would suck if my family gets a fraction of what I was guaranteed. BTW, for those interested about what happens, an FAQ put up in light of the AIG collapse in North Carolina a while backed answered it.

Will I still have insurance coverage?

Insurance guaranty associations have been established in every state and are designed to protect policy-holders if their insurance company becomes insolvent. If a company becomes insolvent, the insurance guaranty association ensures continuation of coverage either by taking on the policy directly or by transferring the policies to a financially stable insurer.

What about any claims?

Most life and health guaranty associations provide coverage at limits of at least $300,000 for life insurance death benefits, $100,000 for life insurance cash surrender values, $100,000 for annuity withdrawal or payment values, and $100,000 for health insurance benefits.

Most property/casualty guaranty associations provide coverage on a per-claim basis for personal injury and property damages up to $300,000 and provide full benefit coverage for workers’ compensation claims.

Since 1988, the life and health insurance guaranty system has participated in approximately 100 multi-state insurer insolvencies, guaranteeing more than $21 billion in coverage benefits and assessed their member insurers more than $6 billion to protect more than 2.2 million insured consumers.

Since the early 1970s, the property/casualty insurance guaranty system has provided protection to policy-holders in more than 450 cases of insurer insolvencies, paying a total of approximately $21 billion in claims and expenses.

Where does that money come from to cover claims?

If an insurance company goes bankrupt, any amount of coverage that cannot be attained from the company’s liquidation is borne by other insurers in the state according to the amount in premiums those insurers earn from that state.