Some U.S. insurers are turning to Wall Street's financial wizards for relie...
NEW YORK - Some U.S. insurers are turning to Wall Street’s financial wizards for relief from the liabilities of their long-term care policies, posing a challenge for regulators worried about how new industry players will tackle the risks involved.
While these transactions promise financial relief to insurers, they are not without risk. The LTC liabilities can be big enough to weigh on even conglomerates such as General Electric Co. If the premiums from the assumed LTC contracts are invested poorly, there may be insufficient money to cover the payouts, industry experts say.
At stake is the viability of the LTC policies on which elderly and disabled people rely. Without private insurance, they would be forced to pay for their own care or rely on already-stretched state and federal programs such as Medicaid. It was the second such deal for CGIC, which also acquired the LTC business of American Financial Group Inc in 2015.
Prudential Financial Inc and Unum Group were among the insurance firms that announced in 2018 they needed to commit extra cash to fund future LTC liabilities. One insurer, Penn Treaty, collapsed in 2017 under the weight of its LTC obligations.
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