Facing new regulations, SEC pushes life insurers for details on ‘captives’


Reuters–The securities regulator has asked life insurers to disclose the potential cost of forcibly winding down in-house insurance units known as “captives,” whose business model has come under regulatory radar, the Wall Street Journal reported. State insurance regulators, which approve these captive units, have previously raised concerns that some companies may be covering up their financial health by moving business to such related entities, the daily reported.

Insurers that have been in touch with the Securities and Exchange Commission (SEC) on this matter include MetLife Inc., Genworth Financial Inc., Hartford Financial Services group Inc., Protective Life Corp. and Reinsurance Group of America, the Journal reported, citing regulatory filings and people familiar with the matter. The newspaper quoted some insurers responding that discontinuation of captives could hurt their financial condition and force them to raise prices on certain products. Companies form a captive insurance unit if they are unable to find an outside firm to insure them against a particular business venture, or to get better coverage with lower premiums. Such captive insurers can be set up with minimal disclosures and lesser amount of assets to back up these policies than the insurers themselves. Some insurers use captives to help consolidate their hedging of the risk in minimum-income and other guarantees sold on variable annuities, the report said. None of the companies could be immediately reached for comment by Reuters outside of U.S. business hours.