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April 04, 2008 at 11:13 AM
Life insurers may need relief from excessive statutory reserve requirements, because the turmoil in the credit markets seems to be reducing their ability to meet the requirements with securitizations.
Members of the Life & Health Actuarial Task Force at the National Association of Insurance Commissioners, Kansas City, Mo., discussed the problem here during the NAIC’s spring meeting.
Earlier, the NAIC sent out a memo pointing that credit downgrades have made it more difficult for some insurers to get the cash they need to operate.
“The fear of investing in monoline businesses is spilling over to other lines, including life insurance,” NAIC officials wrote in the memo. “More than one department of insurance has expressed concern about companies’ liquidity/solvency because the ability to finance excess XXX-reserves is ‘drying up.’ “
Some insurers have what appear to be statutory reserves that are about 3 times as large as economic analysis suggests the insurers need, the officials wrote.
“Without the ability to reinsure these reserves or securitize them, some major term life carriers could become statutorily insolvent while being very economically viable,” the officials wrote.
