Life Insurers Fall, after Relief Plan is Rejected

Life insurance regulators' surprise rejection late Thursday of industry proposals to relax capital and surplus requirements is a win for policyholders, but could have a damaging effect on stocks in the sector.

In a teleconference Thursday afternoon, the executive committee of the National Association of Insurance Commissioners (NAIC) denied -- despite the recommendation of its own working committee -- the request of the American Council of Life Insurers (ACLI) to loosen capital and surplus requirements in nine specific proposals. The insurance group sought the changes to reduce pressure on the balance sheets of insurance companies, whose investment portfolios have suffered as markets swooned last year.

"So far the insurance industry is in much better condition than most of the rest of the financial services sector because of strong state solvency regulations," NAIC President and New Hampshire Insurance Commissioner Roger Sevigny said in a statement announcing its decision. "Simply put, the industry has not made a credible case for why we need to make changes on an emergency basis, and why those changes should be limited to the specific proposals made by the industry." ...