With the onset of the economic crisis, life insurance companies have worked to decrease high-risk investments while solidifying their cash reserves. Llife insurance analyst Steven Schwartz, from Raymond James and Associates, said insurance companies are holding twice as much cash than in the past few years, in order to cover their debts, Investment News reports.
The recent downgrade of the U.S. government's credit rating by Standard and Poor's did cause the KBW insurance index to drop 9.83 percent initially, but the index is currently 134 percent higher than it was in March 2009, the news source reported. Vice president of A.M. Best Company, Andrew Edelsberg, told the news source life insurance companies are proactively selling riskier securities and giving up some yield for safety purposes.
In an op-ed that appeared on Delaware Online, Karen Weldin Steward, Delaware's insurance commissioner, said the S&P downgrade did not hurt most life insurance providers. Stewart said the insurance industry's exposure to U.S. government securities is significant, with life insurance companies accounting for 60.8 percent, or $411.6 billion of that exposure. This exposure represents 12.5 percent of life insurance companies' total invested assets. The downgrade has not negatively affected insurance companies' ability to pay claims or decreased their financial solvency, Stewart said.