Could there be a insurance company default because of the Coronavirus?

[morganist]

If you tried charting the top property/casualty insurers the answer is obvious. BRK.A looks fine, AIG took a big hit in February but it's recovering, MET took a big hit in February but it has gained a good portion of it back, ING has come off quite a bit since 2018 - took a big hit in February and has stabilized since, ALL took a hit in February but has gained quite a bit back.

Healthcare stocks actually gained. UNH, HUM have all rallied throughout and continue.

So you mean the insurance companies share prices have fallen and recovered in general? What about the insurance payout rate and also the impact on the investments insurance companies hold to make payouts in the future? This could be the bigger problem, unless that is what you meant in your post in the first place or was I correct in thinking it was the share price you commented on?

In any event the area I am more worried about is the potential of an increase in payouts if there is another wave or two of the outbreak. The other issue is the impact on pensions if the investment stock insurance companies hold is hit. This is the reason why, many pension funds are insurance policies so if the insurance industry is hit by the Coronavirus again it could impact your pension. OOPS!

 

[bone]

Your understanding of the securities held by US property and casualty insurance companies versus US pension funds is wildly incorrect. Since you are a self-described macroeconomist so stuck in with government pension plans I'm shocked.

About 35 percent-ish ish of US pension fund holdings are equities and about 10 percent or so is in alternative investment vehicles. At present the top investment sector for US pension funds are equities. About the only investment that insurance and pension funds would have in common are Sovereign bonds with some very limited overlap in municipal debt.

So you mean the insurance companies share prices have fallen and recovered in general? What about the insurance payout rate and also the impact on the investments insurance companies hold to make payouts in the future? This could be the bigger problem, unless that is what you meant in your post in the first place or was I correct in thinking it was the share price you commented on?

In any event the area I am more worried about is the potential of an increase in payouts if there is another wave or two of the outbreak. The other issue is the impact on pensions if the investment stock insurance companies hold is hit. This is the reason why, many pension funds are insurance policies so if the insurance industry is hit by the Coronavirus again it could impact your pension. OOPS!

 

[Burigelv]

Unfortunately, this is a topic when all this has certain problems, and they are solved for a long time.

 

[morganist]

Your understanding of the securities held by US property and casualty insurance companies versus US pension funds is wildly incorrect. Since you are a self-described macroeconomist so stuck in with government pension plans I'm shocked.

About 35 percent-ish ish of US pension fund holdings are equities and about 10 percent or so is in alternative investment vehicles. At present the top investment sector for US pension funds are equities. About the only investment that insurance and pension funds would have in common are Sovereign bonds with some very limited overlap in municipal debt.

The point you raise if very far from my position. It is very different in the United Kingdom, a lot of the pension schemes are insurance policies so the point I am making is if insurance companies are hit for whatever reason it could cost someone their pension. There are a few types of private pension in the United Kingdom Self Invested Personal Pension, Stakeholder Pensions and Private Pension Schemes.

Private Pension Schemes are insurance policies not investment funds, so if there is a problem in the insurance industry for whatever reason these pension could default. My position is that the Coronvirus could cause enough of a problem for insurance companies for them to impact the Private Pension Schemes insurance policies costing people their pensions. I understand this may be different in America but in the UK many private pensions are insurance policies.

The other point I raised in my last post and is a question I asked you, is, Are you stating the share price of insurance companies when you state that they have fallen and bounced back or the payout rate or the value of the investment funds they hold? This is what I was unsure of, because if it just the share price you describe as falling and bouncing back it still would not show the true position of the insurance company at the time in terms of operating ability.

Remember many companies enter administration because of limitations in their ability to operate due to cash flow problems, stock availability problems, or in the case of the Coronavirus the inability to operate under normal circumstances. In any event just the inability to continue business could prevent the insurance companies from operating, due to the need to get funds for payouts, cash flow data might be the most important factor.

 

[tsznecki]

The point you raise if very far from my position. It is very different in the United Kingdom, a lot of the pension schemes are insurance policies so the point I am making is if insurance companies are hit for whatever reason it could cost someone their pension. There are a few types of private pension in the United Kingdom Self Invested Personal Pension, Stakeholder Pensions and Private Pension Schemes.

Private Pension Schemes are insurance policies not investment funds, so if there is a problem in the insurance industry for whatever reason these pension could default. My position is that the Coronvirus could cause enough of a problem for insurance companies for them to impact the Private Pension Schemes insurance policies costing people their pensions. I understand this may be different in America but in the UK many private pensions are insurance policies.

The other point I raised in my last post and is a question I asked you, is, Are you stating the share price of insurance companies when you state that they have fallen and bounced back or the payout rate or the value of the investment funds they hold? This is what I was unsure of, because if it just the share price you describe as falling and bouncing back it still would not show the true position of the insurance company at the time in terms of operating ability.

Remember many companies enter administration because of limitations in their ability to operate due to cash flow problems, stock availability problems, or in the case of the Coronavirus the inability to operate under normal circumstances. In any event just the inability to continue business could prevent the insurance companies from operating, due to the need to get funds for payouts, cash flow data might be the most important factor.

@Overnight read the above post ^ or the quoted reply so @morganist can't edit it and tell us how many spelling and grammatical errors there are.

And @morganist claims to be advising governments on policy?

Maybe that's why the world is so fucked.

 

[Overnight]

@Overnight read the above post ^ or the quoted reply so @morganist can't edit it and tell us how many spelling and grammatical errors there are.

And @morganist claims to be advising governments on policy?

Maybe that's why the world is so fucked.

I'm not a grammar/spelling nazi. Not these days, and certainly not when it comes to morganist. He has sent his economic theories to the head of states in multiple countries, and is apparently a genius, the likes of which have not been seen since John Nash. I dare not mess with the white knight of pensioners in the UK. Out of my league.

I think he even posted a canned response letter from HM the Queen. That is proof right there that he single-handedly saved the UK from financial armageddon.

 

[morganist]

@Overnight read the above post ^ or the quoted reply so @morganist can't edit it and tell us how many spelling and grammatical errors there are.

And @morganist claims to be advising governments on policy?

Maybe that's why the world is so fucked.

According to a Microsoft Word spelling and grammar check the only error in the post is the spelling of Coronavirus, which is the correct way to spell it according to media articles. In terms of grammar the post is good, the paragraphs are broken up evenly and the information is separated into the correct divisions. The punctuation maybe a little bit lacking, where I may have missed out or misplaced a comma or two but other than that the post is OK. The information in the post is also accurate and explains why in the United Kingdom if there is a problem with insurance companies it could impact a person's pension scheme or annuity.

In terms of my work being used by governments, since my work has been used in the United Kingdom the economic targets have been achieved until the Coronavirus happened. Many Treasury cost efficiencies have also been made saving the government billions of pounds each year. The use of pension saving and pension investment management has stabilised the macroeconomy and led to more secure pension investment portfolios. For example the increase in the issuance of corporate bonds and the increase in investment of pension funds in corporate bonds has increased corporate fund availability and given pensions fixed returns.

 

[newwurldmn]

No because all the insurance companies have to do is change their criteria for compensation and they can walk away without paying a cent. All they have to do is claim this pandemic as "Act of God" and that's it. They won't have to pay a cent because most insurance policies exclude "Act of God". You watch. I am sure insurance companies will pull this one on their clients aka victims.

the only risk is business interruption but most policies only cover business interruption due to physical reasons. Act of government doesn’t qualify.

 

[morganist]

No because all the insurance companies have to do is change their criteria for compensation and they can walk away without paying a cent. All they have to do is claim this pandemic as "Act of God" and that's it. They won't have to pay a cent because most insurance policies exclude "Act of God". You watch. I am sure insurance companies will pull this one on their clients aka victims.

Is this not a default of another sort, in that the insurance company does not pay out on its claims. In any event the whole function of insurance is derailed if this scenario happens, which could be more damaging than an individual insurance company default. Why pay for insurance if you do not get to claim it?

 

[bone]

So are you claiming that it was your idea for the UK Pension System to buy corporate paper? Which of your novel ideas did the UK government adopt at your behest? Were you on the Blair Task Force? Or are you just claiming credit for something that the UK system has already been doing? Where are you cited in the LSE and Oxford white papers on the UK pension system?

In terms of my work being used by governments, since my work has been used in the United Kingdom the economic targets have been achieved until the Coronavirus happened. Many Treasury cost efficiencies have also been made saving the government billions of pounds each year. The use of pension saving and pension investment management has stabilised the macroeconomy and led to more secure pension investment portfolios. For example the increase in the issuance of corporate bonds and the increase in investment of pension funds in corporate bonds has increased corporate fund availability and given pensions fixed returns.