Property/casualty insurers Travelers Cos. Inc. and Chubb Corp. said they do not need federal financial assistance and chided other insurers pushing to be included in the $700 billion bailout.
“Most companies in the P&C (property-casualty) industry are in a strong position despite market turbulence,” Chubb spokesman Mark Greenberg told Reuters, adding that the intention of the bailout was to spend “taxpayers dollars where there is a risk of failures.”
Among insurers there has been one high-profile near collapse. American International Group Inc. last month avoided bankruptcy by getting an $85 billion rescue package from the U.S. government after mortgage-related losses on credit default swaps left it in a severe cash crunch.
But so far, few others in the industry have come close to needing Chapter 11 protection because of bets on the U.S. housing market.
Chubb and Travelers each sent letters of protest to Treasury Secretary Henry Paulson on Tuesday, adding their voice to a growing debate over whether insurers should be extended federal aid.
“We are vehemently against the application” of the bailout to the P&C industry, said Greenberg.
On Monday, the American Insurance Association — which represents 350 property-casualty insurers including Travelers, Chubb and Ace Ltd — said most of its members do not support inclusion of property-casualty insurers in the Treasury’s capital purchase program.
The Treasury is studying how it could give relief to insurance companies under a proposed financial services rescue, two sources familiar with the deliberations said on Friday.
While property/casualty insurers have largely responded with a “thanks, but no thanks,” life insurers and bond insurers are pushing to be included in the bailout.
Travelers Chief Executive Jay Fishman said the federal aid should not be extended to insurers, including those in the life insurance sector, but be preserved for more “acute” circumstances.
Chubb also wants the broader insurance industry precluded from Treasury’s capital purchase program, saying it would give those who participated access to “cheap capital.”
“It really isn’t fair — it would be giving those getting the bailout an unfair advantage,” said Greenberg, the Chubb spokesman.
Fishman, the Travelers chief executive, said in his letter to Paulson the industry should explore “private market solutions in these circumstances, preserving federal financial assistance for more acute problems.”
Chubb’s letter to Paulson was written by chief operating officer John Degnan.
The growing debate threatens to divide the industry. Bond insurers such as MBIA Inc. and Ambac Financial have held meetings with regulators to push for inclusion in the federal plan. And the life insurance industry is also seeking to take part.
As the federal plan stands now, insurers that do not have federally regulated units would not be included in the bailout but that is not ironclad.
Frank Keating, president of trade group the American Council of Life Insurers (ACLI), said the industry was “pleased” that it may be extended the aid, and said the plan could boost the nation’s confidence in financial institutions.
“Life insurers want to make sure consumers don’t delay acting on their financial and retirement security needs out of concerns prompted by current economic conditions,” Keating said, in a statement. The ACLI represents 353 life insurers, including Hartford Financial Services Group, Assurant Inc and Lincoln National Corp.
(Reporting by Lilla Zuill, editing by Richard Chang, Gary Hill)