Additional bailout money for ‘thrift’ insurers undermines healthy competition

Giving additional bailout money to insurance companies that are also savings and loans (thrift) holding companies undermines healthy competitors, said the Property Casualty Insurers Association of America (PCIAA).“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,” David A. Sampson, president and CEO of PCIAA, said in a statement.“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.”Healthy insurers losing market share would have to reduce employment and increase premiums to make up for lost revenues, he continued. “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,” Sampson argued. “The vast majority of insurers, which are healthy and sound, do not currently need federal investment in their businesses.”