dumb question. if you have life insurance with say genworth and the company blows up, is your life insurance policy fine? thanks
Yes. In most cases insurance companies participate in the reinsurance market to hedge more of their risk.
My understanding is that prior to them blowing up the regulator (Department of Insurance of the state in which the company is domiciled) will take hold of the company ensuring an orderly payout to all policyholders.
Listen to wjj83 (not sure what ditchdigger2CFA is talking about.)
VOBA Wrote: ------------------------------------------------------- > Listen to wjj83 (not sure what ditchdigger2CFA is > talking about.) wjj83 is right. I was only pointing out that most insurance companies sell off some of their insurance contracts to re-insurers (like a bank selling a mortgage). What this does is further lower their risk exposure. Reinsurance companies to insurance companies is a huge b2b. So the event of an insurance company rescinding on their contractual obligations is slight.
thanks guys. little family issue here i had to resolve.
ditch, The question was about the company blowing up, not where the risk is. Policyholders don’t have recourse to reinsurance companies. The state DOI can take over the company and try as best it can to pay all claims, but more likely they will facilitate a private sale of the company or portfolio. Each State has a guarantee association/fund that would cover losses in the transaction, and could theoretically be used to fund claims for an insolvent insurer that had zero claims paying ability. But the situation is different from the banks, it’s not like all of the sudden there’s zero cash to pay any claims because of fear in the market or something.