Insurers Holding Out Hope For TARP Access
There may be a number of insurers lined up for government money, if and when they gain access to TARP funds. There has been a renewed drive recently to include insurance companies and reports claim that a decision to include insurers may come shortly.
Still there is the question, is there enough remaining in TARP to solve the problems of the banking system, let alone help out the struggling insurance industry? With the Treasury still conducting it’s stress test for the nation’s largest banks, it is still unclear how much more capital they will need.
To date the only insurer that has received government funds is AIG, in a massive bailout that has soured many Americans’ support for subsidizing financial institutions in danger of collapse. The executive compensation scandal has probably done the most harm in preventing insurers from gaining access to TARP thus far.
Gaining access to that capital would likely prevent credit downgrades for a number of insurers and further erosion of their access to said credit. The government is also likely to take equity stakes in these companies like they have for many of the banks that have already received TARP funds.
Are we likely to see the gradual nationalization of the insurance industry like what has already started to happen in the banking system? For now it seems unlikely, for the most part the problems in the insurance industry don’t seem as widespread as is the case for the banking system, for another there just isn’t that much money left in TARP any ways.
Only a few select insurers are likely to gain approval for TARP considering that banks will get most of what’s remaining. It is also likely that the government will have to tap into the $250 billion placeholder in this year’s budget that has been set aside for additional financial support.
For the some insurers it could mean the difference between insolvency and staying in business and they can’t wait to get in line for their handouts.
