Company Investments - Regulator Knowledge

Executive Life 

• Regulators' efforts to limit junk bond holdings and restrict unacceptable reinsurance were not effective in stemming the solvency problems of the four insurers.
• Regulators did not know about the quality Dr value of the insurers' junk bond holdings and did not have specific authority to limit such holdings when the insurers built up their portfolios.
• Even when New York and California acted to limit more junk bond acquisitions by the insurexs, these limits did not reduce the insurers' exposure to mounting junk bond losses.
• Whereas New York took forceful-- albeit lade--action to eliminate reinsurance problems at Executive Life of New York, California practiced regulatory forbearance for Executive Life and First Capital.

Holding Companies

• Finally, holding companies are a regulatory blind spot.

--  Statement of Richard L. Fogel, Assistant Comptroller General, General Government Programs 

1992 0218 - GAO - Insurance Regulation:  The Failures of Four Large Life Insurers - 21p