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Uncle Sam To Throw Lifeline to Life Insurers

Posted by Larry Doyle on April 7, 2009 9:06 PM |

life-preserverNo surprise here. Starting with my interview of Sean D’Arcy in early January, I have tried to highlight the expected capital shortfalls in the insurance industry.

Obviously not every life insurance company has the same issues but the models are largely similar.

Don’t expect the number of insurers looking to jump into this lifeboat to be only a few. State guaranteed funds for insurance companies total a whopping $8 billion.

Additionally, if consumers look to tap the cash value in their policies, the insurance industry will potentially need to raise more than a few hundred billion dollars. That capital can be generated by asset sales or “hello, Uncle Sam!”

The WSJ reports: Treasury Plans To Extend TARP to Life Insurers.

The Treasury Department plans to extend the Troubled Asset Relief Program to certain eligible life insurers, according to people familiar with the matter. Several life insurers have been burdened lately by capital constraints amid ailing markets.

The Treasury is expected to announce within the next several days the inclusion of life insurers that are bank holding companies or own a thrift, these people said.

How much money would be available to the insurers remains unclear. The Treasury says it has about $130 billion remaining in TARP funds. Life insurers that are bank holding companies have been eligible for TARP for some time, but the Treasury had not yet given the green-light to approve their applications.

Several have applied, including Prudential Financial Inc., Hartford Financial Services Group Inc. and Lincoln National Corp. No decisions have been made yet about which applications will be approved, these people said.


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