October 24, 2008

SOURCE: InsuranceNewsNet, Inc.

The Treasury Department is working on how to use the $700 billion bailout fund to help insurance companies, according to The Washington Post.

The money would help insurance companies act as a critical backstop to a deals, bond issues and leasing arrangements, according to The Post. The move reflects the department’s concern that insurance companies, many due to report third quarter earnings next week, are teetering toward bankruptcy under the weight of investment and coverage losses.

Although the Treasury Department said companies that act like a thrift and are regulated by the federal government are already eligible for the bailout money, sources have told the Post that the Treasury is also looking at ways to help insurance companies that are regulated by states.

It is not the first time that insurers’ imminent collapse has been in the news. During the bailout discussion, Sen. Harry Reid, D-Nev., said someone in the Democratic caucus was worried that a well-known carrier was close to claiming bankruptcy. Carrier stocks plummeted after the remark, prompting some insurers to issue statements denying they were not the company Reid referred to. Reid’s office later said he did not mean a specific company.

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