Contagion

  • 1994 - FRB / AP - Announcements of Asset-Quality Problems and Contagion Effects in the Life Insurance Industry, Journal of Financial Economics, Vol. 35, No. 2 - 29p
    • 2014 1218 - LC - 15-cv-45 - MetLife v FSOC - re: MetLife - D85-2, 85-2 - Explanation of the Basis of the Financial Stability Oversight Council’s Final Determination that Material Financial Distress at MetLife Could Pose a Threat to U.S. Financial Stability and that MetLife Should be Supervised by the Board of Governors of the Federal Reserve System and Be Subject to Prudential Standards  ---   [BonkNote]   ---  387p
  • And doubts about the value of AIG life insurance products could have generated doubts about similar products provided by other life insurance companies, feeding the panic that was crippling the economy.  (p78)

-- Tim Geithner

2009 1210 - COP - TREASURY SECRETARY TIMOTHY GEITHNER - 98p, VIDEO-Youtube] - MP3

  • [Bonk: Contagion-?]
  • In the meantime, a movement was afoot within the life insurance industry led by Metropolitan Life Insurance Company, as well as the securities brokerage industry, to put together an enhanced rehabilitation plan which would raise the crediting rate on the SPDAs from 5.5% to at least 7.5%.
    • This effort was motivated not only by a desire to salvage the reputation of SPDAs as an investment vehicle, but also to make the SPDA holders whole and thus eliminate damage claims in the many suits filed against the brokers who sold SPDAs.
    • Forty of those cases had been consolidated in the United States District Court for the Southern District of New York, and came to be known as MDL 581, (The Honorable Charles Brieant presiding); In re Baldwin-United Corporation Litigation, 581 F. Supp. 739 (J.P.M.L. 1984).
    • Any commitment to such a plan, financial or otherwise, was initially contingent upon a resolution of the dispute between the rehabilitators and the Debtors.
    • If this could not be accomplished by early 1985, the possibility of an enhancement plan was threatening to evaporate.

1987 1016 - LC - Matter of Baldwin-United Corp, (Bankr.S.D.Ohio 1987) - United States Bankruptcy Court, S.D. Ohio, W.D.  Oct 16, 1987 - casemine.com/judgement/us/5914c194add7b049347ba6af

⇒  CITATION CODES - 79 B.R.321, DOCKET NO. - Bankruptcy No. 1-83-02495.

  • (p93) - [Contagion] - MetLife’s size and market prominence increase the potential for MetLife’s material financial distress to cause or exacerbate contagion.
    • MetLife holds approximately 10 percent of the total admitted assets (on a statutory basis) in the U.S. life insurance industry422  and has a market share of life insurance products of approximately 16.6 percent.423
    • Institutional and individual contract holders and policyholders with the ability to surrender or withdraw their contracts early may seek to do so.
    • MetLife’s material financial distress could lead investors to withdraw from other insurers or other significant financial intermediaries, out of fear that those firms could also experience distress.424
    • These actions could lead to a reduction in the provision of credit and a reduction in financial markets activities by market participants seeking to reduce exposures to other financial firms, which could impair financial intermediation and financial market functioning.
    • Institutional policyholders could potentially experience greater losses because of institutional products that have redeemable, investment-like features that may increase MetLife’s near-term liabilities and do not have any additional third-party protections.
      • Notably, the avoidance of contagion effects was an important concern before the intervention that helped to prevent the potentially disorderly failure of AIG in the fall of 2008.425

2014 1218 - LC - 15-cv-45 - MetLife v FSOC - re: MetLife - D85-2, 85-2 - Explanation of the Basis of the Financial Stability Oversight Council’s Final Determination that Material Financial Distress at MetLife Could Pose a Threat to U.S. Financial Stability and that MetLife Should be Supervised by the Board of Governors of the Federal Reserve System and Be Subject to Prudential Standards  ---   [BonkNote]   ---  387p

  • (p15) - These resources and the record of success for coordinated responses clearly demonstrate that the fear of “contagion” resulting from a run on insurer assets is greatly overstated

2015 0626 - LC - 15-cv-45 - NAIC - Document 43 - Consent Motion of the National Association of Insurance Commissioners for Leave to File Brief as Amicus Curiae in Support of Plaintiff Metlife, Inc. - 32p

  • (p24-25) - Steve STIVERS (R-OH).  I have a quick question for Mr. Monroe and Mr. Lanza.
    • In the scenario that Mr. Schwarcz gave earlier about a run on life insurance companies, wouldn’t the State regulatory scheme under McCarran-Ferguson have to essentially completely collapse and fail and the State regulators not do their jobs?
  • Michael LANZA. (Executive Vice President and General Counsel, Selective Insurance Group, Inc., on behalf of the Property Casualty Insurers Association of America (PCI)
    • I believe so.
  • Steve MONROE. (Chief Compliance Officer, U.S. & Canada, for Marsh, Inc., on behalf of the Council of Insurance Agents & Brokers)
    • I would have to agree with that.
    • I can’t imagine a scenario where it would be a contagion from life insurance company to life insurance company.

2011 1116 - GOV (House) - Insurance Oversight and Legislative Proposals, Judy Biggert (R-IL) - [PDF-131p - VIDEO-?]