How are life insurance policies and annuities being safeguarded? Currently, they are backed by state guaranty associations. The only problem with this arrangement is that most of the states are running low on available funds and are entirely reliant on the good faith promises to pay made by the major life insurance companies.

Why is this situation a problem? It is comes down to stock prices. Many life insurer stocks, which were traditionally immune to the fears and uncertainties that rocked other sectors in recent months, are now experiencing direct hits. In some cases, stocks have dropped nearly 50% of their value in the last two months alone. Met Life is just one company that has reported a $17 billion decline in debt investments for the third quarter of 2008. This problem has been exacerbated by the sales of variable annuities that come with guaranteed-income features by a number of insurers.

The system has managed to stay afloat despite the threats to its security. Yet, this could change. Insurance companies may not share the danger of immediate collapse like banking institutions, but they can fail, albeit at a much slower rate. Once an insurer does go belly up, state regulators come in, sell of what they can of the company’s assets, and then bill other life insurers still operating in the state so policyholders are protected.

The other problem is that many maintain the assumption that only small insurers will be likely to fail and not more than one at a time. With the double loss of Lincoln Memorial Life Insurance and Benicorp Insurance in 2007, there may be signs that the insurance markets are being further weakened, but may manage to make it through the current financial dilemma plaguing the nation.

Financial Crisis May Threaten Life Insurance Policies is a post from: Peppercoin Insurance

The economic troubles that have been plaguing the US since 2007 haven’t ended yet, claimed Bernanke. Thus, the Federal Reserve Bank is unlikely to wish the US prime rate to rise above 2% during the next few months.

America’s recent real estate and subprime lending crises, combined with rising inflation and unemployment, have created “one of the most challenging economic and policy environments in history,” said Bernanke. Although some Federal Reserve Board members have advocated increasing the interest rate to address the country’s high rate of inflation, most appear to agree with Bernanke.

America’s present economic slowdown will counteract inflation, believes Bernanke along with most of the Fed. Interest rates must remain low to encourage Americans to borrow and spend, thus combating economic stagnation.

The prices of US goods rose by a record 5.6% during the month of July, the highest monthly increase the US has seen in 17 years. However, the Fed anticipates that prices will eventually drop, especially for internationally-traded commodities such as oil, said Bernanke. Although the chairman termed the present US inflation situation “highly uncertain,” he predicted a normalization of inflation rates to occur “in the medium run.”

During the course of the symposium, Bernanke also argued for “broader” regulation. Rather than regulating specific companies, Bernanke asserted that the Fed should instead look at nationwide policies. In this way, the Fed should be able to anticipate problems such as the recent credit crisis before they  begin, argued the

Meanwhile, Bernanke added, consumers never be lulled into complacency. “An expectation by the financial market participants that financial crises will never occur would create its own form of moral hazard and encourage behavior that would make financial crises more, rather than less, likely,” Bernanke admonished.

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Bernanke Favors Low Interest Rates, Pushes For Broader Economic Regulation is a post from: Peppercoin Insurance