Fed bank fearful of insurance risks
March 26, 2014 by Arthur D. Postal
The growing use of captives is among “the rising and poorly-understood risks to the financial system” posed by the U.S. life industry, according to a new study commissioned by the Federal Reserve Bank of Minneapolis.
The report also singled out deep concern for the trend toward guaranty riders in variable annuities because of the shift from defined-benefit to defined-contribution plans.
Ironically, the study by Ralph Koijen, a London Business School professor, and Motohiro Yogo, a monetary advisor to the Minneapolis Fed, was released the same week as Benjamin Lawsky, superintendent of the New York Department of Financial Services, sent a letter to the National Association of Insurance Commissioners (NAIC) in advance of its spring meeting in Orlando that criticizes a plan proposed by the NAIC to strengthen oversight of captives.