Sunday, March 29, 2009


The insurance industry could be the next shoe to drop in the financial crisis, a big hedge fund warns. "We think the insurance industry now is essentially where the banking industry was 12 months ago," according to the 5½-page report by Bridgewater, which is distributed to a tight circle of clients.

Bridgewater said the worst of the insurers' problems have yet to emerge. It noted that the industry could be forced to come up with as much as $59 billion in fresh capital as a result of downgrades on assets these companies are sitting on. Insurers are also big owners of commercial real-estate loans, and that market is widely expected to falter as a result of corporate cutbacks and depressed office rents. On top of that, Bridgewater projects the industry will have to shell out as much as $800 billion on so-called whole-life policies, which essentially are life-insurance policies with a savings component. Historically, during rough economic times, holders of these policies tend to draw down on money built up in these accounts whenever they're short on cash.

1 comment:

Bionic~Guy said...

I make you right, i recently reviewed my life insurance through a company called Rainbow i found online. No longer could i afford to insure myself at levels i have previously so ireduced the amount of benfit to coincide with my monthly budget drop. Im now paying almost half what i did before for the lesser cover. If everyone follows my footsteps then this would result in a massive drop of income for the life insurers. Problem being like me, people just dont have the funds to keep up expensive life payments