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Cliston Brown
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Phone:
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202-639-0497
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cliston.brown@pciaa.net
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Additional Bailout Money for Insurance-Related Thrift
Holding Companies Undermines Healthy Competitors
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WASHINGTON—David A. Sampson, president and CEO
of the Property Casualty Insurers Association of America (PCI), today issued
the following statement.
“The Treasury Department faces the difficult job of trying to solve our
nation’s financial crisis while minimizing the moral hazards stemming from
federal intervention. Providing additional subsidized taxpayer loans to
insurers who are also thrift holding companies could create unintended negative
effects on consumers and the marketplace.
“Insurers that become bank or
thrift holding companies can get cheap federal loans through Treasury’s Capital
Purchase Program and then shift this subsidized capital to their insurance
affiliates. This cheap money allows unhealthy insurers to grab more market
share in the short term at levels that are unsustainable in the long term. Such
actions potentially not only undermine healthy competitors but also spread
additional risk to bank or thrift subsidiaries receiving the federal money.
This destabilization of the marketplace makes it increasingly impossible for
the government to unwind the unsustainable market conditions it helped create.
“The unfortunate results
for consumers and taxpayers are more risk, higher costs, less competition and
an increasing reliance on government intervention and resources. Healthy
providers losing market share would have to reduce employment and increase
premiums to make up for lost revenues. And even highly profitable and fiscally
sound insurers would have a duty to their shareholders to line up for federal
largesse to avoid being boxed into a competitive disadvantage. The vast
majority of insurers, who are healthy and sound, do not currently need federal
investment in their businesses.
“PCI, which represents the
broadest cross-section of insurers of any national trade association, has
eschewed assistance under the Emergency Economic Stabilization Act of 2008.
Despite the challenges of this economic downturn, our members remain the safest
and strongest financial sanctuary in the current storm. Our insurers have behaved
responsibly and continue to be generally well-capitalized and managed,
providing sound and secure products to consumers. In addition, we are highly
regulated at the state level for solvency. We do not need government rescue at
this time and believe that such help would actually harm consumers and the vast
majority of responsible insurers. We believe consumers benefit in the long run
much more from free and open competition.”
PCI is composed of more than 1,000 member
companies, representing the broadest cross-section of insurers of any national
trade association. PCI members write over $198 billion in annual premium, 40.5
percent of the nation’s property casualty insurance. Member companies write 51.6
percent of the U.S. automobile insurance market, 39.7 percent of the
homeowners market, 33.2 percent of the commercial property and liability
market, and 38.7 percent of the private workers compensation market.
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