State to track cash outflow of life insurers

August 17, 1991|By Peter H. Frank

With worries mounting that jittery policyholders could shake the health of the life insurance industry, Maryland regulators said yesterday that they would begin tracking the amount of cash withdrawn each month from all life insurers based here.

The state's insurance commissioner, John A. Donaho, ordered each of the 20 life insurers in Maryland to start reporting their monthly outflow of policyholders' money beginning in mid-October. The first report will also include the monthly amount of policies that have been either cashed in or borrowed against beginning the first of this year.

"The things that can threaten life insurance companies are a run on the bank and bad real estate," said Charles Siegel, associate insurance commissioner. "This covers a run on the bank."

The effect of the twin threats of a policyholder run and bad real estate investments became starkly evident a month ago when Mutual Benefit Life Insurance Co. was seized by New Jersey regulators. The company, with $13.5 billion in assets and 400,000 policyholders, had suffered doubly as real estate loans soured and about $1 billion was pulled out by nervous policyholders in the weeks preceding the seizure.

Mr. Siegel said the heightened oversight in Maryland was a precautionary move and was not a result of concern over a particular company.

In a related move, Mr. Donaho bolstered oversight of the 42 property and casualty companies based here by requiring them to file all reinsurance contracts within 10 days of the date that they are signed. To help protect against a single huge loss, insurance companies buy their own insurance policies from reinsurers, requiring the reinsurer to pay off claims above a set amount.

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