In further evidence that the historic upheaval in credit and financial markets are forcing every financial institution to consider new alliances it is being reported today in the Wall Street Journal that Met Life and Hartford had talked about a merger in the days prior to the Allianz purchase of Hartford preferred shares and warrants.
What is interesting to all of us in the structured settlement industry when we hear these rumors and watch the on going consolidation of other financial entities is that other then the melt down of AIG, thanks to their financial products division, is how well the life insurance industry is holding up in the current crisis.
I hate to speak too soon, but it would appear that the lesson's learned and the regulatory structure put in place post Executive life, Mutual Benefit, Confederation Life has effectively limited the exposure of life insurance companies to toxic assets and crazy hedging strategies. In fact, the major buyers of financial assets look to be some of the big, widely diversified but conservatively managed life markets such as Manulife, Mass Mutual, Pacific Life and to some degree Aviva. Also, as the testimony of NY Insurance commissioner Dinallo showed, the fire wall of asset segregation forced on life markets has limited any losses or issues a company might have to lines such as variable annuities where their need to increase reserves for market guarantee riders creates a bad year, but won't prove fatal to any of the companies.
I suspect we are about to witness some serious shopping and buying by the life insurance companies that sat out this crisis thanks to their prudent product and investment mix, but how that might alter the structured settlement market remains to be seen.
I will have an expanded analysis of where the structured settlement market is headed in the next two years once we get through this current panic, but in the mean time I think policy holders and structured settlement claimants can sleep a bit more easily then other investors knowing the safety net created 15 years ago by the insurance regulators appears to be doing it's job and protecting policyholders to a degree unmatched in all other investment or saving choices.
