Accession Number : ADA299000

Title :   Insurance Regulation: The Failures of Four Large Life Insurers,

Corporate Author : GENERAL ACCOUNTING OFFICE WASHINGTON DC GENERAL GOVERNMENT DIV

Personal Author(s) : Fogel, Richard L.

PDF Url : ADA299000

Report Date : 13 FEB 1992

Pagination or Media Count : 20

Abstract : GAO is testifying on the financial characteristics and regulation of four large insurance companies recently taken over by state regulators. GAO's observations about the regulation of the insurers are preliminary because its review of the performance of state regulators is not yet complete. Executive Life and its subsidiary Executive Life of New York were taken over in April 1991 by state regulators in California and New York, respectively. First Capital and Fidelity Bankers were taken over in May 1991 by California and Virginia, respectively. These failures, due in large part to a reckless strategy of high growth and investment in high-risk assets, have had national consequences. The four insurers had a total of more than 900,000 policies with policyholders and annuitants in every state. During the 1980s, the assets of the four insurers grew six to ten times faster than assets of the life insurance industry overall. This growth was fueled primarily by sales of high-yield retirement investment products, not traditional life insurance policies. To cover the high rates paid to policyholders and maintain profitability, the insurers invested heavily in high- risk assets--most notably junk bonds. High upfront costs due to rapid growth seriously depleted the insurers' surplus, or net worth. (KAR) p. 2

Descriptors :   *ORGANIZATIONS, *FAILURE, *INSURANCE, *REGULATIONS, CONTROL, VIRGINIA, POLICIES, HIGH RATE, INVESTMENTS, ACCOUNTING, FINANCIAL MANAGEMENT, GROWTH(GENERAL), NEW YORK, REGULATORS, COSTS, CALIFORNIA, FINANCE.

Subject Categories : Economics and Cost Analysis

Distribution Statement : APPROVED FOR PUBLIC RELEASE