|
Showing posts with label Insurance. Show all posts
Showing posts with label Insurance. Show all posts
Sunday, 26 April 2009
Oregon Health Plan fosters insurance research
Friday, 24 April 2009
House approves key insurance measure
|
Thursday, 23 April 2009
European Parliament Backs New Rules For Insurance Sector
|
Wednesday, 15 April 2009
Public Insurance Concept May Prove Sticking Point in Health Care
|
Tuesday, 6 January 2009
Flawed Deposit Insurance Programs Need Reform, Banking Expert Says
Government insurance programs that safeguard bank deposits should be reformed to ease taxpayers’ undue stake in propping up the nation’s banking system, according to research by a University of Illinois finance professor.
George Pennacchi says the Federal Deposit Insurance Corp., created during the Great Depression to halt bank runs, is supposed to protect savings through premiums paid by banks, but is effectively subsidized by the U.S. Treasury, putting tax dollars at too much risk.
“We have a system where when things get bad, taxpayers end up being forced to pay for bank failures, not just the FDIC,” Pennacchi said.
Proof that deposit insurance has grown overly generous has surfaced amid a global economic meltdown, he said, with investment firms such as Goldman Sachs and insurance giant Hartford Financial becoming banks to get access to insured deposits.
“One of the reasons why that’s so, and I think this has been a long-standing problem, is that government has tended to subsidize deposit insurance, sort of through a back door,” Pennacchi said. “The savings and loan crisis is an example. Instead of premiums paid by thrifts covering the losses, about $124 billion came from taxpayers.”
He proposes reforms in a research paper that will be presented this month at an economic conference sponsored by the American Enterprise Institute, a conservative-leaning, Washington-based think tank that seeks to influence public policy.
One reform, Pennacchi said, is veering away from an approach that provides nearly unlimited government financial backing when large institutions such as Bear Sterns are on the brink of failure. The government, he says, deems some banks “too big to fail,” with so many connections to other financial markets that failure could net a disastrous domino effect.
But he says the problem can be addressed without leaving taxpayers on the hook. He proposes a central clearinghouse requiring banks to put up collateral in derivative trading that would cover potential losses if one of the parties fails.
“That would get rid of the too-big-to-fail problem and is done all the time with exchange-traded derivatives,” Pennacchi said. “If you trade on the Chicago Mercantile Exchange, there’s a clearinghouse that requires both parties to put up collateral, so if one of them fails it doesn’t cause a loss for their trading partners.”
He says the FDIC should also reform premiums for deposit insurance that have historically been artificially low, covering only average losses and heightening risks of a taxpayer bailout in the event of widespread bank failures.
A move toward rates charged for similar, private-market insurance, such as credit-default swaps, would likely yield significant premium increases, roughly doubling current rates, Pennacchi said.
“But I think that’s the minimum that needs to be charged to protect taxpayers and prevent the government safety net from expanding even more,” he said.
Pennacchi also advocates either abandoning a dedicated deposit insurance fund, managing the program through the treasury instead, or creating a swap market that would level out banks’ premiums.
He says banks could lock in deposit insurance costs through a premium swap market, rather than paying higher premiums when bank failures rise and receiving rebates on premiums when failures are low. The swap market would be similar to interest rate swaps, transferring risk to investors outside of the banking industry.
“If there’s any reform that would be easy to do it would be to create this premium swap, which would lead to more stability for banks because they wouldn’t face high premiums in bad years when they’re least able to pay,” Pennacchi said.
His research will appear in a book that will be published this year by the American Enterprise Institute. The book will focus on government guarantee programs ranging from the FDIC to crop and terrorism insurance.
George Pennacchi says the Federal Deposit Insurance Corp., created during the Great Depression to halt bank runs, is supposed to protect savings through premiums paid by banks, but is effectively subsidized by the U.S. Treasury, putting tax dollars at too much risk.
“We have a system where when things get bad, taxpayers end up being forced to pay for bank failures, not just the FDIC,” Pennacchi said.
Proof that deposit insurance has grown overly generous has surfaced amid a global economic meltdown, he said, with investment firms such as Goldman Sachs and insurance giant Hartford Financial becoming banks to get access to insured deposits.
“One of the reasons why that’s so, and I think this has been a long-standing problem, is that government has tended to subsidize deposit insurance, sort of through a back door,” Pennacchi said. “The savings and loan crisis is an example. Instead of premiums paid by thrifts covering the losses, about $124 billion came from taxpayers.”
He proposes reforms in a research paper that will be presented this month at an economic conference sponsored by the American Enterprise Institute, a conservative-leaning, Washington-based think tank that seeks to influence public policy.
One reform, Pennacchi said, is veering away from an approach that provides nearly unlimited government financial backing when large institutions such as Bear Sterns are on the brink of failure. The government, he says, deems some banks “too big to fail,” with so many connections to other financial markets that failure could net a disastrous domino effect.
But he says the problem can be addressed without leaving taxpayers on the hook. He proposes a central clearinghouse requiring banks to put up collateral in derivative trading that would cover potential losses if one of the parties fails.
“That would get rid of the too-big-to-fail problem and is done all the time with exchange-traded derivatives,” Pennacchi said. “If you trade on the Chicago Mercantile Exchange, there’s a clearinghouse that requires both parties to put up collateral, so if one of them fails it doesn’t cause a loss for their trading partners.”
He says the FDIC should also reform premiums for deposit insurance that have historically been artificially low, covering only average losses and heightening risks of a taxpayer bailout in the event of widespread bank failures.
A move toward rates charged for similar, private-market insurance, such as credit-default swaps, would likely yield significant premium increases, roughly doubling current rates, Pennacchi said.
“But I think that’s the minimum that needs to be charged to protect taxpayers and prevent the government safety net from expanding even more,” he said.
Pennacchi also advocates either abandoning a dedicated deposit insurance fund, managing the program through the treasury instead, or creating a swap market that would level out banks’ premiums.
He says banks could lock in deposit insurance costs through a premium swap market, rather than paying higher premiums when bank failures rise and receiving rebates on premiums when failures are low. The swap market would be similar to interest rate swaps, transferring risk to investors outside of the banking industry.
“If there’s any reform that would be easy to do it would be to create this premium swap, which would lead to more stability for banks because they wouldn’t face high premiums in bad years when they’re least able to pay,” Pennacchi said.
His research will appear in a book that will be published this year by the American Enterprise Institute. The book will focus on government guarantee programs ranging from the FDIC to crop and terrorism insurance.
La. homeowners to get cash from incentive fund
Louisiana homeowners could receive cash from the unused portion of an expired pot of government money used to lure insurance companies to the state, Insurance Commissioner Jim Donelon said Monday.
Donelon estimated the checks would total $50 or more, though he's not sure when the Department of Insurance will mail them.
The money comes from the remainder of a $100 million fund set up in 2007 as matching grants for private insurance companies that agree to begin writing policies in coastal areas.
The incentive program was aimed at improving homeowners' access to private insurance after the 2005 hurricanes, and to reduce the number of policies written by the state's "last-resort" insurer, Louisiana Citizens Property Insurance Corp.
The insurance department issued $29 million in grants, and state law says the remaining money should be divvied up and given to holders of homeowners policies.
Donelon, speaking to the Press Club of Baton Rouge, also said he plans to back legislation this spring that would help consumers by eliminating a health-insurance loophole that can produce bills from radiologists, pathologists and anesthesiologists. Donelon said a small percentage of those specialists do not fall under health insurance plans, and their care can trigger bills on top of patients' deductibles.
Donelon said he expects the bill to encounter opposition from the insurance and hospital industries.
Donelon estimated the checks would total $50 or more, though he's not sure when the Department of Insurance will mail them.
The money comes from the remainder of a $100 million fund set up in 2007 as matching grants for private insurance companies that agree to begin writing policies in coastal areas.
The incentive program was aimed at improving homeowners' access to private insurance after the 2005 hurricanes, and to reduce the number of policies written by the state's "last-resort" insurer, Louisiana Citizens Property Insurance Corp.
The insurance department issued $29 million in grants, and state law says the remaining money should be divvied up and given to holders of homeowners policies.
Donelon, speaking to the Press Club of Baton Rouge, also said he plans to back legislation this spring that would help consumers by eliminating a health-insurance loophole that can produce bills from radiologists, pathologists and anesthesiologists. Donelon said a small percentage of those specialists do not fall under health insurance plans, and their care can trigger bills on top of patients' deductibles.
Donelon said he expects the bill to encounter opposition from the insurance and hospital industries.
Sunday, 4 January 2009
Beaumont Insurance Agencies Are Reporting More Drivers Dropping Insurance To Save Money
Insurance agencies are reporting more drivers are letting their car insurance lapse because of the sour economy and that is putting themseleves and others at risk.
According to the insurance research council several hundred thousand drivers dropped their insurance in the past year as the jobless rate climbed.
Online Agency Insurance Dot Com says it's also seeing evidence recently of more uninsured motorists.
Another factor may be that many people faced with huge bills from hurricanes let their insurance lapse, but this could be a costly decision.
Subscribe to:
Posts (Atom)
