1990 1210 - GOV (Senate) - Insurance Company Solvency - Howard Metzenbaum (D-OH)

  • 1990 1210 - GOV (Senate) - Insurance Company Solvency: Insurance Company Solvency and Reporting Methods, Howard Metzenbaum (D-OH)  ---  [BonkNote]
    • [PDF-596p-GooglePlay, VIDEO-?] ->Not on govinfo.gov - R
    • Present: Howard Metzenbaum (D-OH) and Strom Thurmond (R-SC)
    • Surplus Notes, Junk Bonds, Real Estate, Insurance Regulation, 
    • [Bonk: Connect: Run on Life Insurance Company, Contagion, MetLife v FSOC, 2008 Crisis - AIG]
    • Senate - Committee on the Judiciary - Subcommittee on Antitrust, Monopolies, and Business Rights
  • (p1) - Howard Metzenbaum (D-OH) - If we have learned anything from the savings and loan crisis, we have learned it was preventable.
    • The warning signs were clear, but unfortunately they were ignored. We must not ignore some of the same signs in the insurance industry—lax regulation, outdated ac counting methods, overvalued assets, and in some instances low capital requirements.
    • Like past savings and loan regulation, current insurance regulation in most States is not equipped to detect or prevent another financial debacle for millions of Americans who would lose their pensions, investments, and insurance.
    • Some of the leaders of the insurance industry understand this. In March of this year, IDS Financial Services, a leading life insurance company, issued a report. One of their conclusions was, quote, "The quality of regulation in the life insurance industry is disturbingly similar to that existing in the thrift industry during the early 1980's." That from a member of the industry itself.
    • Today's hearing is the first step in finding out what is really going on in the insurance industry.
  • (p2) - Howard Metzenbaum (D-OH) - In opening this hearing, I want to announce that this subcommittee is beginning a series of hearings on the insurance industry which will continue throughout the first session of the 102d Congress and, if need be, beyond that.
    • The goal of these hearings is to determine whether the American public is adequately protected by the way States regulate insurance companies and their investments.
  • (p3) - Howard Metzenbaum (D-OH) - Current regulatory accounting standards allow insurers to record these junk bonds, real estate and real estate mortgage holdings at their original purchase price. There are many who believe that these accounting methods are contributing to the ability of insurance companies to mask the true value of their companies, making them appear to be legally solvent when, in fact, they are economically insolvent or in serious financial trouble.
  • (p3) - Howard Metzenbaum (D-OH) -  IDS understands that, quote, "The trust, hopes and dreams of Americans will depend on a State guarantee system that neither has the financial resources or administrative capacity to respond effectively to major losses in the industry," end of quote.
    • Finally, IDS puts their view on the life insurance industry into this grim perspective, quote, "The loss of consumer confidence that would follow the failure of a well-known insurer could have a widespread effect on the industry, with massive cash withdrawals induced by the insolvency of one insurer leading to the insolvency of other less financially secure companies," end of quote. [The survey and IDS report can be found in the appendix.]  --  [Bonk: Run on Life Insurance Company, Contagion, MetLife v FSOC]
  • (p3) - Howard Metzenbaum (D-OH) - Unfortunately, we will not get answers today to many of our questions. Even though we invited six life insurance companies, none agreed to appear. I personally spoke with the President of the American Council of Life Insurance and asked him to seek the testimony of a life insurance company. None would agree to appear.
    • [Bonk: Connect: 1993 0525 - GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance?, Howard Metzenbaum (D-OH)  ---  [BonkNote]
      • (p4) - Senator Howard Metzenbaum (D-OH):  In addition, the ACLI, the national trade association for life insurance companies, refused to testify last year and refused to come today.
        • I consider their actions reprehensible and irresponsible.
        • The refusal of the companies and the agents to participate in today's hearing leads me to think they have something to hide.
  • 1989 - Joseph Belth -The Weakening of the Financial Standards Applied to Life Insurance Companies, The Insurance Forum - 68
  • APPENDIX
    • Subcommittee insurance survey summary of responses - 207
    • A position paper by IDS Financial Services Inc., dated March 1990, entitled "Will the U.S. Life Insurance Industry Keep Its Promises?" - 242
      • [Bonk: Connect: 1990 - SOA - Emerging Issues, Society of Actuaries - 38p]
        • William Carroll, ACLI: Cathy Waldhauser will present the IDS paper, and then Reed Miller will provide a critical response.
        • Cathy H. Waldhauser: "Will the U.S. life industry keep its promises?" That was the title of a position paper that IDS issued in March 1990. - <WishList>
        • ...
        • Reed P. Miller: I happened to be watching a "Saturday Night Live" anniversary show.
          • The skit of Dan Akryod and Jane Curtin doing their "Point/Counterpoint" really stuck out as being a prime example of how we might liven up what are oftentimes rather dull discussion sessions.
          • But, given that I had never met Cathy before, I had a real difficult time starting by labeling her in the way that Dan Akroyd labeled Jane Curtin.  So I elected to not do that. 
          • [Bonk: My Best Guess: 1979 - Saturday Night Life -Weekend Update: Jane, You Ignorant Slut - SNL - [VIDEO-YouTube]
    • 1990 09 - Report - ACLI - Report by the American Council of Life Insurance, on solvency concerns, dated September 1990 - p313-
    • 1989 1219 - Article by David Conn - Insurer Solvency Plan Praised and Panned" - 432
    • 1990 1207 - Letter - ACLI - from Richard S. Schweiker, president, American Council of Life Insurance, re accounting practices of the life insurance industry - 433