Life insurance companies, an oft-overlooked yet important cog in the financial infrastructure, haven’t been immune to tumbling markets, the Wall Street Journal reports, which are eroding both their portfolios and consumer confidence. A Dow Jones life insurance index is off 59% this year and 82% from its 2007 high, leading a dozen insurers to apply to the Treasury for bailout funds.
Life insurers own about 18% of all corporate debt, making them one of the largest holders, and buyers, of those bonds. As the economy weakens, so does their buying position, as insurers must hang onto more cash to meet capital-reserve requirements. An industry group expects the Treasury to rule later this month on the bailout funds.