The Year Of The Recession

Christopher N. Baker, a managing partner at TexIns Solutions Ltd., Houston, a distributor service organization specializing in wealth transfer, wealth management and executive benefits, said sales at his firm have been increasing.

“The bad news: a tremendous increase has been required of manpower and effort,” he said.

Baker criticized insurers for what he called a “shortage of reliable information” about how they are dealing with the financial crisis. “We want to hear them say, ‘We have a handle on it,’” he said.

Dona Kinnaird, president, Swiss Re Life and Health America Inc., part of Swiss Reinsurance Company, Zurich, told conference participants that the recession has proven the importance of life insurance to the economy.

Life insurance promotes economic growth by supporting risk-taking, helping families manage key financial risks and reducing the financial burden of providing safety nets for governments, she said.

American consumers have lost $10.8 trillion since 2007, or roughly 17% of their net worth, she said. In reaction, they have increased their savings rates, focused, on increasing their financial protection and have become increasingly willing to sacrifice yields for certainty–and all of those shifts should be good for the life insurance and reinsurance industry, Kinnaird said.

But the recession has depleted excess capital and cut investment yields in the industry, resulting in a 25% increase in downgrades among life insurance companies and a 55% increase in negative outlooks over 2008 levels, she observed.

There have been no upgrades in ratings among companies in the industry so far in 2009, she added.

Mark Puccia, a managing director at Standard & Poor’s, New York, said outlooks are negative partly because the rating agencies fear that 10.3% of the corporate bonds due this year will default, and that 13.9% of the corporate bonds due next year will default.