Newspaper article The Christian Science Monitor

Insurance Woes Raise Concerns about Pensions as Some Insurers Fall, Others Benefit as Retirement Funds Seek Safety. SAVINGS AT RISK

Newspaper article The Christian Science Monitor

Insurance Woes Raise Concerns about Pensions as Some Insurers Fall, Others Benefit as Retirement Funds Seek Safety. SAVINGS AT RISK

Article excerpt

PHONES are jingling off the walls at the major insurance company rating agencies with calls from policyholders anxious to learn the financial status of their particular insurers.

"We are just flooded with calls - 100 percent above our usual levels," says Kate Ennis, a spokeswomen for the ratings division of Standard & Poor's Corporation.

Americans spend 5 percent of their disposable income on life insurance. They have generally assumed their money, invested in $1.4 trillion in assets, was safe. Now insurance companies find themselves under the microscope following the collapse of a several large insurers. On July 16, New Jersey state took over Mutual Benefit Life, the nation's 18th largest insurer with assets of just under $14 billion. This is the largest insurance failure in history.

Moody's Investors Service recently downgraded several major insurance companies.

Public concern is leading to some cancellations of pension plan policies. In some cases, pension plan monies are being rerouted to the highest-rated insurers, industry experts say.

The insurers, for their part, are looking for ways to develop new insurance products with built-in "safety" features. Most importantly, the new products would help to keep the risk of any possible financial failure distanced from the insurers themselves.

The area where such new products are most under development - and where concern is perhaps greatest - involves guaranteed investment contracts. During the past decade GICs have become the backbone of most company-sponsored (401-K) retirement plans. Under a typical GIC plan, the insurer pays a fixed rate of return on the capital invested into the plan - often referred to as a fixed-income fund - by the participating company and its employees.

Currently, 60 to 70 percent of all 401-K assets are invested in GICs, with the remainder usually placed in different types of equity funds, says Anita Potter, an expert on GICs with the Life Insurance Marketing and Research Association (LIMRA), a trade/consulting firm in Farmington, Conn. Based on the 40-plus insurance companies that respond to surveys by LIMRA, at least $150 billion is invested in GICs. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.