Insolvencies

  • In the early 1990s, there were a number of large insolvencies

--  Willis B. Howard Jr., NOLHGA - National Organization of Life and Health Insurance Guaranty Associations

1998 - SOA - Once in a Hundred Years, Society of Actuaries - 22p

  • 1991 0427 - Los Angeles Times - State Allegedly Knew Executive Life Was Insolvent in ’83, by Robert A. Rosenblatt - [link]
  • Baldwin United
  • You can give me what has happened from the days when the whole business was technically insolvent in the spike during the 1977-82 period when everybody valued bonds at book.
    • The well-kept secret, of course, was that the industry was insolvent, not bankrupt on a cash-flow basis.

--  Larry A. Brossman, Duff & Phelps

1990 - SOA - Rating Agencies And Asset/Liability Matching, Society of Actuaries - 18p

  • We find that companies have been operated with all the appearance of solvency for periods of months, and even years, while it was known that they were actually insolvent.

1936 December 1, 2, 3, 7, 8 - GOV (House) - Investigation of Real Estate Bondholders' Reorganizations - Part 20 - Adolph J. Sabath (D-IL)   ---   [BonkNote]

  • 1991 0612 - Insurance Insolvencies - [VIDEO-CSPAN]
  • Senator Howard Metzenbaum (D-OH), known for his contentiousness on the floor of the Senate, addressed a luncheon audience at the National Press Club.
    • He discussed the recent spate of financial crises in the insurance industry, such as the financial collapse of Executive Life Insurance company, which has left hundreds of thousands of policy holders in California and New York unsure of the state of their insurance coverage. 
    • Sen. Metzenbaum criticized state insurance regulators for failing to adequately maintain knowledge of the financial affairs of the insurance agency.
      • He claimed insurance laws written by the insurance industry, inadequate staffing, infrequent examinations, inadequate capital regulation, and lack of coordination between the states are the reasons for the instability of the insurance industry.
      • He recounted several “accounting gimmicks” used by the insurance industry to appear financially solvent despite true financial instability
  • 1992 - LR - The Effects of the Insurance Industry Insolvency on Pensioners' Incomes: A Plan for Federal Insurance, by Lee Anne LeBlanc - 33p
  • 2015 - Geneva - U.S. and Japan Life Insurers Insolvencies Case Studies: Lessons learned from resolutions, A Geneva Association research Report, Edited by Etti Baranoff - 52p
    • APPENDIX - Insolvencies 2008-2012 by country - p45
  • 2018 - SOA - A Review of Root Cause in Insurer Insolvencies and Impairments,  by Dave Heppen and Veronika Cooper, Society of Actuaries - 6p
  • In the early 1990s, there were a number of large insolvencies.
  • ...
  • This led to creative solutions to some of the major insolvencies, such as establishing the Guaranty Reassurance Corporation, which was formed to take over the assets and liabilities of the insolvent Guaranty Security Life.
    • In this plan, there was a 25% moratorium surrender charge assessed against policyholders who wished to surrender.
    • These graded off over a five-year period.
  • The funding of the guaranty associations' obligations for Guaranty Re was also spread over a five-year period.
      • They funded them, in effect, with notes at the beginning of the 1993 Reassurance Plan.
  • As many of you know, the funding for Executive Life was also spread out over a number of years.
    • ⇒  Who bears the cost?
  • ...
  • To determine the cost of recent insolvencies, and how long has it taken to resolve them, let's define a major insolvency as one that has policyholder obligations of more than $100 million.
  • There have been 14 of these in the last 10 years, including three big ones:
    1. Confederation Life
    2. Executive Life
    3. Mutual Benefit
  • Total policyholder obligations were $28 billion as of the date of the liquidation order.

--  Willis B. Howard Jr., NOLHGA - National Organization of Life and Health Insurance Guaranty Associations

1998 - SOA - Once in a Hundred Years, Society of Actuaries - 22p

  • ........life insurance companies are not nearly so solvent as their re­ports might indicate.

-- Mr. Gregory (Editor of the Prairie Farmer, Chicago, Ill..)

1932 - FRB - Federal Reserve Board : Bill Opposition - Price Stabilization, 1932, Subject File, Box 119, Folder 8 -  [link-212p]

  • (p589) - Ms. Pruitt said that some limitation on policy restructuring is fair, but that the working group should note that some insolvencies have been caused by insurers issuing policies containing unrealistic promises and guarantees.

1995-1, NAIC Proceedings - Guaranty Fund Issues Working Group B of the Insolvency (EX5) Subcommittee - September 11, 1995

  • Commissioner Hager (IA) discussed the resolution, prepared by the Securities and Insurance Regulation (EX) Task Force, which was adopted by the NAIC in December 1987 encouraging reciprocal treatment of assets in cases of insurer insolvency.
    • He proposed that a letter from the Task Force be sent to the states which have not adopted the NAIC Book Entry System Model Act and Book-Entry System Regulation, encouraging them to do so.
    • He also suggested that the Task Force monitor ongoing reciprocal treatment among states in the event of insolvencies in line with the resolution which was adopted in December.

Financial Services and Insurance Regulation (EX) Task Force

1988-2, NAIC Proceedings - March 14, 1988

  • Significantly, until the 1980s, no major life insurance company had failed during the working lifetime of most actuaries then in practice.
  • But as with so many aspects of the life and health insurance business, the last decade was, in many respects, a watershed.
    • Most of us have witnessed a revolution in the kind of products we offer, the way they are marketed, the investments made to match the liabilities they create, and the levels of profitability they generate.
  • As we have seen, the failure of such institutions as Baldwin United, and more recently Executive Life, First Capital and Mutual Benefit, have made us cogently aware of this issue.

--  Michael J. Cowell

1991 - SOA - Mandated Risk-Based Surplus, Society of Actuaries - 28p

  • (p29) - Insolvencies among U.S. life insurance companies have been on the rise over the past few years.
    • Before 1987, insolvencies numbered 10 or less and involved smaller companies with assets below $50 million.
      • In 1989 there were 40 insolvencies, including an insurer with $646 million in assets.
    • A task force of the ACLI that undertook a special study of the insolvencies during the 1985-1990 period focused on 68 cases, finding the causes to include:
      • ... affiliate transactions (often involving fraud) in 47 cases,
      • ... problems in accident and health insurance lines in 41 cases,
      • ... underpricing of products in 40 cases,
      • ... investment problems (often real estate) in 31 cases,
      • ... and problems with new management in 25 cases.
    • The identified causes were, of course, often interrelated.

1992 - WorldBank - The Life Insurance Industry in the United States An Analysis of Economic and Regulatory Issues. by Kenneth M. Wright - 54p

  • Between January 1975 and December 1990, 170 life insurance companies failed -- 40 percent during 1989 and 1990.
    • Most of these failed insurance companies were small.
    • In April 1991, however, the California Insurance Commissioner placed the Executive Life Insurance Company in conservatorship.
    • If this company eventually fails, it will be the largest U.S. insurance company ever to do so.
    • Recently, a few other life insurance companies have been placed in conservatorship.  (p1)

1991 0627 - GAO - Insurance Company Failures Threaten Retirement Income - Testimony - Joseph F. Delfico,  Director, Income Security Issues, Human Resources Division - 24p

  • 2. Insolvencies involving insurance companies have risen in recent years.
  • The amount of money assessed by state guaranty funds to pay for insolvencies has increased as well.
    • Historically, life company failures and guaranty fund assessments have been low.
      • For example, from 1975 to 1982, those assessments averaged $6.2 million a year.
    • Recently, however, life company failures have increased significantly.
      • For example, life guaranty fund assessments tripled from $154.8 million in 1990 to $469.7 million in 1991.
  • The problem of insolvency of life companies is not limited to small companies.
    • In April 1991, the California Department of Insurance seized Executive Life Insurance Company of California.
    • Assessments for Executive Life of California could reach $400 million per year over five years.  (p1)

1992 - California GOV - State Solvency Regulation of Property-Casualty and Life Insurance Companies - 144p

  • 1909 - PROPOSED NEW INSURANCE LAW
    • Acting upon the suggestion by Superintendent Hotchkiss, Governor Hughes sent to the legislature last week a message, asking for the enactment of a law conferring created the necessity for some such law, it will be noted that upon the Superintendent power to deal summarily with insolvent insurance companies, or when their affairs are so managed as to render their continuance in business hazardous to the public.
    • The necessity of some such authority being commended in the head of the Insurance Department was demonstrated most emphatically in the recent entanglements connected with the attempt to transfer the Washington Life to a Pittsburg company and remove its assets from the jurisdiction of the State of New York, which attempt was frustrated by the prompt action of the Attorney General.

1909 0318 - The Spectator, VOL. LXXXII

  • 2019 0519 - GOV (House) - The Science of Insolvency - [PDF-67p   VIDEO-YouTube
    • House - Committee on Science and Technology - Subcommittee on Investigations and Oversight Committee on Agriculture