Failed Banks — Part 1: Insurer Exposure

Insurance companies do not have much financial exposure in the new failed Silicon Valley Bank, Silvergate and Signature Bank. Fitch Ratings calls the exposure, “modest.”

Most of the exposure for insurers is from life insurers and the total exposure for all insurers is just $1.16 billion. In its release on the topic of the three banks, the ratings company then outlined how it views a number of exposures for different lines of insurance.

It defined them as mostly stable.

“Life insurance products, whether protection or investment-oriented, are generally intended to provide benefits over the long term or to fund long-term objectives, and often include surrender charges, which disincentivize withdrawals,” Fitch said. “Non-life insurance contracts are designed to finance uncertain events. These product features provide stability to insurers’ liability profiles and promote their ability to match asset and liability durations and maintain sufficient liquidity.”

Banks are whole other issue, but not one of much concern.

“In contrast, banks have very short liability duration, where depositors can generally demand the return of their deposits on any date without penalty, which generally leads to an inherent asset/liability duration mismatch,” Fitch’s release on the matter said.

Source link: Reinsurance News —

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