Tuesday, January 27, 2009

THE "WIZARD OF OZ" SOLUTION TO INSURANCE COMPANY SOLVENCY

Life Insurers' Request for Relief Challenged
By David S. Hilzenrath Washington Post Staff Writer Tuesday, January 27, 2009; D02
A life insurance industry request for regulatory relief would place consumers "at undue risk," Virginia's insurance commissioner said.
Weakened by the financial crisis, life insurers have been seeking freedom to operate with thinner financial cushions, and state regulators from across the country are convening in Washington today to hear testimony on the proposals.
Virginia Insurance Commissioner Alfred W. Gross weighed in with a letter to fellow officials Friday, saying one of the key proposals could make it harder for regulators to step in as needed "when dealing with truly troubled companies."
Gross's was one of several statements challenging the proposals.
"Lowering solvency standards on an emergency basis during a time of financial crisis is contrary to their very purpose," Louisiana Insurance Commissioner James J. Donelon said in a letter dated Friday. "In addition, no study or analysis has been performed to show any sound reasoning or justification for these changes."
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The nation's life insurers, gathered in Washington for their 'share' of the federal bailout funds, make no case for solvency. What they are interested in is the appearance of solvency, while throwing the actuality to the winds.
And why not?
Are we not a country that aspires to appearance? Are we not assured by smiles on faces rather than lines (either bottom or wrinkly)? Reducing the percentage of equity required by said companies against the risk of loss, would immensely increase the chances of default--but it would shine up the appearance of solvency.
Who needs the real thing when they can have something that looks just as good as the real thing?
It's the American way. It's what made us the envy of a world we have labored long and hard to deceive into imminent collapse. Fear not--go ahead and die--we promise to pay off.