Should insurance companies receive $22 billion of TARP money?

Posted May 15th 2009 6:30PM by Connie Madon
Filed under: Financial Crisis

This is a strange world. Once we thought that life insurance companies were among the safest in the world, but now a new change is blowing in. The government is worried about the assets and liabilities of six major life insurance companies, so they are bailing them out to the tune of $22 billion.

The main problem is that these insurance companies recently acquired banks to qualify for part of the TARP funds.

So now banking rules apply as well as the 51 different regulators that monitor insurance companies. Life insurers as well as pension funds face losses in their portfolios due to the economic downturn. The government used the term "unprecedented stress" and has become concerned especially about their real estate loans.

Some analysts, however, question if this bailout is enough. Mainly because of the strain on the banking system as a whole. What is feared is that in a crisis investors could cash in their policies, thus putting further pressure on their ability to meet all their obligations.

There is also a continuing fear that overall stress on the banking system would cause rating agencies to lower their ratings of these companies.

Putting it all together, the government decided to act now to stave off any future disasters.

Should insurance companies be bailed out?

Tags: bailout, banks, insurance companies, inthenews, tarp