Who protects annuities if the insurer fails?

[cute fuzzy bunny]

I'll bet she knows the answers...

[brewer12345]

Quote:

Originally Posted by ziggy29 At least until their main watchdog started paying $3,000 an hour for hookers, anyway.

There is a world of difference between the NYS Insurance Department and the attorney general. There is onlyone state insurance dept I would ever consider working for. Guess which one that is?

[cute fuzzy bunny]

I'm not sure, but I'm quite certain I dont want to see any pictures of THEIR hookers...

[chinaco]

AIG is in a cash crunch. IT has happened to many insurers over the years where a long-term asset is temporarily illiquid. In the case of the Mortgage Backed Securities... the question is: what are they worth? I am not sure anyone knows.

If I had an AIG P&C Policy... I would replace it.

As for Life insurance... I would research it. You may be stuck if you are not healthy or the cost is high. But I would consider replacing it... IMHO only use Triple A (conservative) Insurance Companies. NW Mutual would be my pick... there are a couple of others that are (Triple A rated across 3 or more rating agencies)

Regarding annuities that have not been annuitized. I would consider doing a 1099 rollover.

I am sure that insurance state commissioners will revise their RBC levels (for Mortgage backed securities) for Statutory reporting to the NAIC. WHile they are at it, they probably need to put an RBC provision in that limits holdings of any newly created securities that are not well understood. I am sure those $h!theads on Wallstreet will dream up another nightmare that will entice fools and bring out the opportunist... leaving everyone else holding the bag.

Hey didn't insurance companies expereince a Real Estate shock back in the early 90's from owning too much real estate. Mortgage Backed Securities would seem to have some similarities in risk. They are more liquid than owning the real estate... but if the asset values melt-down (the actual property)... then the results are similar.

[2B]

This whole thing is somewhat absurd. AIG is covered up with assets but the "mark to market" rule is hammering them. It's like your next door neighbor loses his job, gets divorced and has his house repossessed. Now, your mortgage company sees that the sale of your former neighbor's house is at 50% of its prior assumed value.

Here we take the tack that your mortgage is like the terms AIG and the other financial companies live under. It then demands that you pay off your $300,000 mortgage in 24 hours or it will take immediate possession of your home. You don't have time to sell your stocks or bonds and have the proceeds available. You don't have $300,000 in your checking account. Bang. You're bankrupt.

[ChrisC]

The process in which insurance companies get liquidated and how creditors claims get paid is complicated and perhaps a convoluted process, dependent on the vagaries of state law and a state apparatus that is seldom, if ever, tested. My wife's professional malpractice insurance carrier went into liquidation/receivership and it was not a pretty picture. Who knows what type of cross-guaranty liability a family of insurance companies under one holding company might have against each other under state law -- the so-called "corporate shell" is not all that protective in this environment. Lawyers will think of creative ways to pierce corporate shells.

Looks like McCarran-Ferguson, the Federal law which permits the States to essentially regulate all aspects of the insurance business, might be turned on its head after this infusion of Federal funds into AIG. The state insurance departments appear to have been sleeping at the switch, which is quite different than OFHEO, the Federal entity that regulates Fannie and Freddie, which was a toothless regulator.

Chinaco, you seem to know a bit here. How do the state insurance regulators treat GICs or similar credit support instruments underwritten by insurance companies? According to the NY Times article today, a major reason for treating AIG's potential failure as a systemic risk to the economy is that it is heavily involved in esoteric credit support instruments in these mbs transactions. Is there a mechanism, like bank examiners, where they would classify the asset or investment risk and then adjust capital levels? Just curious.

[brewer12345]

Quote:

Originally Posted by ChrisC How do the state insurance regulators treat GICs or similar credit support instruments underwritten by insurance companies? According to the NY Times article today, a major reason for treating AIG's potential failure as a systemic risk to the economy is that it is heavily involved in esoteric credit support instruments in these mbs transactions. Is there a mechanism, like bank examiners, where they would classify the asset or investment risk and then adjust capital levels? Just curious.

It depends on which entity wrote the GICs. If it is an insurance company obligation, the GIC has policyholder status in a liquidation, although state guaranty fund support is usually quite limited ($300k or so IIRC) if there isn't enough at the Insurer to cover claims.

But I believe that the bulk of the problematic transactions were not at the insurance company level.

[2B]

Quote:

Originally Posted by brewer12345 But I believe that the bulk of the problematic transactions were not at the insurance company level.

That's been their story all along but we've been misled before.