No Runs on Life Insurance

  • GOV - Congressman Ross, Holtz-Eakin
  • GOV - Congressman Duffy, Daniel Schwarcz

2011 1116 - GOV (House) - Insurance Oversight and Legislative Proposals - pdf-131p

(p15) - Mr. MONROE ( Compliance Officer, U.S. & Canada, for Marsh, Inc., on behalf of the Council of Insurance Agents & Brokers).

I will keep this simple. I think there are several key differences between banks and insurance companies. In the insurance industry,

I don’t think there is really a risk of a contagion. 

If there is a problem in one insurance company, it really doesn’t spread to another insurance company, there isn’t going to be a run on the bank,...

  • ....and despite what Mr. Schwarcz said, with the hundreds of years we have had life insurance, there has never been a run on life insurance, and I don’t see one happening, and it didn’t happen during the financial crisis.

2011 1116 - GOV (House) - Insurance Oversight and Legislative Proposals - pdf-131p 

(p15) - Mr. SCHWARCZ.  Now, we have not seen a run on the life insurance industry generally...

  • ...but I think it is hard to say whether or not that would or would not have happened if we didn’t have the Federal intervention we had in the global financial crisis.
  • For life insurers, the risk of a bank-like “run” resulting from loss of consumer confidence is virtually non-existent.

2016 0831 - Life Insurers Do Not Pose a Systemic Risk to the Nation’s Economy, Dirk Kempthorne  (president and chief executive officer of the ACLI - [LINK}

2017 0328 - GOV (House) - The Arbitrary and Inconsistent Non-Bank SIFI Designation Process

  • (p14) - Mr. KUPIEC (Resident Scholar, American Enterprise Institute):
    • Yes, and the designations for the insurance companies, the way the FSOC makes it, is very unusual in that it treats the products of insurance companies as if they were bank deposit like liabilities that could be withdrawn, that people would line up and withdraw the residual value of their life insurance policies or whatever.
    • And they are not bank deposit-like products, and there is really no evidence that there have been any institution-wide runs on all the various subsidiaries at any time in the past.
      • So the story is a very fictional story that the FSOC uses to make the designation.
  • (p29) - Mr. ROSS (R-FL). And so, has there ever been a run on an insurance company in the history of the United States?
    • Mr. HOLTZ-EAKIN. No.
      • One of the mysteries of this designation has been ignoring the history of successful regulation of insurance companies and also the use of scenarios which are completely unrealistic for that insurance business.