Posted on 19 Dec 2008
State insurance regulators are seeking to ease reserve requirements for life insurers, increasing the companies’ liquidity as investors and banks curtail funding of the industry.
The National Association of Insurance Commissioners advanced a proposal to reduce the amount of money carriers must hold against guarantees made to variable annuity clients. The potential reform, criticized by a consumer advocate, may be adopted in time for 2008 financial results, the NAIC said yesterday.
“Typically insurers would turn to the capital markets for reserve relief,” Roger Sevigny, president of Kansas City, Missouri-based NAIC, told reporters yesterday on a conference call. By relaxing standards, “it becomes easier for the companies to meet the requirements of banks and other credit facilities.”
Life insurers are seeking relief from regulators after losses on stocks, mortgage bonds and corporate debt forced the firms to slash dividends, suspend buybacks and raise capital. Prudential Financial Inc., the second-biggest life insurer, and Lincoln National Corp. advanced in New York trading yesterday.
“Passage of the capital relief measures would be beneficial” for insurers including Prudential, Lincoln and Hartford Financial Services Group Inc., Andrew Kligerman, an analyst at UBS AG, wrote in a note.
The NAIC, a forum for state regulators, outlined new reserve guidelines in September to be adopted at the end of 2009. Last month, as the stock slump deepened, insurers called on regulators to speed reform.