Bailout funds extended to insurance companies

 

Monday, May 18,2009, 9:46:50 AM   Click:

The Department plans to extend beyond the bailout fund for banks and automakers to six of the largest life insurance companies.
The government has granted preliminary approval of Prudential (PRU), Lincoln National (LNC), Allstate (ALL), CFO (PFG), Hartford Financial (HIG) and Ameriprise (AMP) for infusions of capital under the so-called Troubled Asset Relief Program, or TARP, "said Andrew Williams, a spokesman for the Treasury.

Hartford Financial, in a statement, said it expects to receive $ 3.4 billion under the program.

Insurers who apply by the program, the deadline of 14 November 2008, and the bank holding company status, are eligible for public funds. Hundreds of other financial institutions who apply will be considered and funded as appropriate, "said Williams.

The government already funds to bail out banks and automobiles. His latest round of aid to boost an industry that faces the lower levels of capital and loss of ball. Some life insurers are also struggling with insurance contracts, such as annuities, which are annual guarantee for consumers, businesses, despite its worsening financial situation.


Not all insurers want the funds, however. MetLife (MET) in April, said he did not need help from the government, providing a sign for investors to its financial stability. The property loss industry, which sells auto insurance and homeowners, also said he does not need a bailout fund.

The government helps insurers life "to ensure the recovery effort is broad and covers all aspects of the economy," said Steve Bartlett, president of the Financial Services Roundtable, which represents insurers and banks .

In general, the TARP program should be extended to many areas of financial sector to the extent possible, "said Bartlett.

Life insurers applied for funds last year, in the hope of fast relief. The government has deliberated on the requests from industry for a period of six months after their approval, it had completed the bank stress tests. Life insurers to own 18% of corporate bonds, so that government investment could help revitalize the credit markets, often a stated objective of financial rescue plan. It can also restore the confidence of 75 million families with policies issued by the insurance industry-life.

In return for government funds, life insurers must comply with a series of restrictions, including limits on salaries.