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Handling failed insurers


Interesting and I will need to think about this for a while. The lack of an appropriate regulator is a worry.
Plus re AMI it was a mutual and as such the policyholders were technically at risk for at least part of the losses. It could well be argued in AMI case that it was doomed to fail. It was just a case of when.

croaking cassandra

Last week I wrote a post prompted by the New Zealand Initiative’s passing suggestion that something like an OBR scheme might be established to handle failed (large?) insurance companies.  The New Zealand Initiative didn’t like the AMI bailout (neither did I) and the suggestion that an OBR option might be considered seemed to be mainly a way of helping ensure that losses lay where they fell, not with taxpayers generally.

I didn’t think that the OBR type of scheme –  focused on keeping the failed institution open –  made a lot of sense for insurers, but recognised the probable political imperative to limit the losses of at least some of those caught in a failure.   Deposit insurance is the typical, and sensible, response to that imperative in the case of bank failure, and some sort of limited policyholder compensation scheme could make sense for insurer failures.

I ended that…

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