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AIA Chairman Even Greenberg Says Insurance Industry Doesn't Need Subsidies

The majority of property-casualty insurers have said "no thanks" to the Treasury Department's suggestion that insurance companies participate in the government's financial rescue, according to...
November 4, 2008

The majority of property-casualty insurers have said "no thanks" to the Treasury Department's suggestion that insurance companies participate in the government's financial rescue, according to American Insurance Association (AIA) Chairman and Ace CEO Evan Greenberg. In an article in the Wall Street Journal, Greenberg said "The insurance industry doesn't need the program and doesn't belong in it. The Capital Purchase Program (CPP) should only assist companies that pose systemic risk to the financial system resulting from counterparty failure, or a major liquidity crisis in the credit markets.

"Some have argued that the life insurance segment of our industry needs the CPP. Some life insurers may want it -- but none of them needs it," Greenberg said. American Council of Life Insurers President Frank Keating issued an October 24 statement that said he was "pleased to learn the Treasury Department is now considering the inclusion of the life insurance industry in its Capital Purchase Program."

"If taxpayer capital were made available, perfectly healthy insurers might feel compelled to participate in a dramatically discounted alternative to the capital markets, just to compete with the companies that do," Greenberg said. Such behavior would turn the CPP on its head, making it a general government capital subsidy rather than a means of crisis correction. Worse, such cheap capital would likely be used by healthy insurers to fuel 'consolidation,' i.e., a program of buying up other companies. This is obviously not the purpose for which Congress authorized the CPP. We owe it to taxpayers to assure that their capital should only be a last resort, and that it should never be cheap."

The Insurance Industry Doesn't Need Subsidies (Wall Street Journal 10/31/08)