Rating agencies back life insurers' Tarp inclusion

Rating agencies back life insurers' Tarp inclusion

Rating agencies Fitch and Standard & Poor's (S&P) believe the inclusion of life insurers in the US Treasury Department's Troubled Asset Relief Program (Tarp) would be a positive step for the beleaguered industry.

It's been reported in recent days that life insurers will become the third industry to become eligible for Tarp funds and follow in the footsteps of the banking and motor industries.

In September 2008 rating agency Fitch revised its outlook for the US life insurance industry to negative from stable reflecting what it says was the deterioration in the credit and equity markets.

However, in a statement Fitch says that government intervention could go some way to addressing those problems.

A report from Fitch said: "As has been seen in the banking industry, government support through the infusion of capital can help stabilise ratings. For life insurers, Fitch expects this could lead to some stabilisation of insurer financial strength or policyholder ratings for those entities receiving support."

Meanwhile, S&P also gave the reported inclusion of life insurance companies the thumps up.

"Participation would bolster liquidity and capital at a time when these vital components of financial health are strained, largely because of other-than-temporary impairments and investment portfolios' declining market values," said S&P credit analyst Matt Carroll.

S&P does not expect participation in Tarp to result in upgrades but believes it could lead to revisions of outlooks to stable from negative.

 

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