Risks – Page 2 – [BonkNote]

Root Cause FSB As we began researching this problem, two questions became central. What criteria should we use to evaluate suggested changes and alternatives? What is the root cause of current problems, and why have previous corrective efforts been so unsuccessful? As research continued, at some point we started to focus on the uses of life…

Tipping Point Dear Editor: Life Insurance Sales Illustrations – A Call to Action We have reached the stage where a life insurance sales illustration is hardly worth the paper it is printed on. Yet thousands of agents are confidently presenting these illustrations to frequently unsuspecting clients. I have yet to discuss this issue with anyone…

Moratorium Moratorium Stay Contractual State Courts (p16) – Willis B. Howard, Jr., NOLHGA – National Organization of Life and Health Insurance Guaranty Associations: I’d like to respond briefly to my honorable friend, Commissioner Bartlett. Dwight, the guarantee association system works, and it works well. Dwight K. Bartlett III, Maryland Insurance Commissioner: Are you going to tell…

AIG – Systemic Risk (p17) – One of the fears was that if things had gone in another direction and AIG had to be wound up, each one of the state commissioners would have had its own proceedings. That was part of what created systemic risk for AIG, where there would be a fragmented series…

CDS Spreads 2018 – JIR – CDS Spreads, Systemic Risk and Global Systemically Important Insurers Designations – 41p Geithner: Trial Tr. 1407:21 – 1408:9 (Geithner explaining that the CDS spread is an indication of the market’s perception of AIG’s default risk)).

Liquidity – Policy Loans Loans [ACLI] – Re: Policy Loan Developments of 15 Life Insurance Companies The purpose of the meeting was to discuss concerns about the liquidity conditions and the possibilities of future adverse developments. The company people wanted to be sure that Mr. Volcker was fully aware of the potentials of the situation…

Guarantees Guarantees Only 2005 – SOA – What’s Backing Your Life Insurance Guarantee? – [LINK]

Moral Hazard Financial Crisis We argue that changes in the life insurance industry have created a nontrivial moral hazard. We document the industry’s shift from sales of life insurance to sales of mainly rate-of-return oriented investments like single premium deferred annuities (SPDAs) and guaranteed investment contracts (GICs). 1992 – FRB-Minneapolis – SPDAs and GICs: Like Money…

Covered Agreements 2018 0220 – NAIC – Covered Agreement Public Hearing – Comment Letters – 176p 2019 – AP – The Future of the US-EU Covered Agreement: How to Drag an Absurdly Federalist Regulatory System into the Global Reinsurance Market – 23p

Low Interest Rate Environment The low interest rate environment poses a significant challenge for life insurers with sizable blocks of liabilities incorporating embedded interest rate guarantees, such as annuities or universal life insurance policies. The industry has reduced its minimum guarantees over time, but products sold when interest rates were higher represent a continue drag on…