Washington, Washington D.c. (PressExposure) April 09, 2009 -- Life insurance companies have come under financial strain in recent months because the credit markets have been frozen causing their capital levels to seriously decline and several of them might soon be getting government bailout money.
A number of the companies involved offered to buy small bank holding companies last fall, but added the proviso that the purchases would be dependent on their obtaining bank holding company status, and TARP (Troubled Asset Relief Program) funds.
Life insurance companies that are bank holding companies are already technically eligible to receive TARP money, and if approved by the Treasury several of them will receive a total of $20 billion.
The companies with their hands out are, Prudential Financial, Genworth Financial, Hartford Financial Services and Lincoln National, and a financial industry source close to the TARP process says that following a review which is still in its preliminary stages, "that some assistance for life insurance companies cannot be ruled out".
Life insurance companies are said to be suffering more during the financial crisis than those that cover health, property and casualty due to their mix of assets which usually includes mortgage-backed securities along with riskier investments that were considered acceptable because their liabilities are longer-dated.
A life policy would more than likely only have to be paid 20 or 30 years down the line, whereas a health insurer might have to start paying out almost immediately.
The Treasury was considering providing TARP funds to life insurance companies under the Bush Administration, but the review was postponed because of the transition to the Obama Administration and the problems in the auto industry.