National Surety Company

National Surety Company

• 1934 – LR – Rehabilitation of the National Surety Company, The Yale Law Journal, Vol. 43, No. 7 (May, 1934), pp. 1146-1156 – 11p – https://www.jstor.org/stable/791393
• 2016 – FRB – The resolution of a systemically important insurance company during the Great Depression [National Surety Company], by Jonathan Rose – 36p
  • This paper explores the economic issues related to systemically important insurance companies, using an example from the Great Depression, the National Surety Company.
  • National Surety was a large and diverse insurance company that experienced a major crisis in 1933 due to losses from its guarantees of mortgage-backed securities.
    • A liquidity crisis ensued, as policyholders staged a massive run on the company, demanding the return of their unearned premiums.
  • The New York State Insurance Commissioner stepped in with a reorganization plan that split the company in two, out of fear that a disorderly liquidation would have systemic consequences given the sheer number of the company’s counterparties, scattered all across the United States.
  • A key dynamic of the crisis was that policyholders at an insurance company have a dual role as holders of liabilities and as providers of income.