Regulators eye insurers’ disclosure of retained-asset accounts

Insurance regulators plan to examine how insurance carriers report and maintain death-benefit proceeds that are held in so called ‘retained asset accounts.’
“We’re paying close attention to how these accounts are reported through the financial filing process and looking to see if more can be done with their oversight,” said Susan Voss, insurance commissioner of Iowa and president-elect of the National Association of Insurance Commissioners, in an e-mail.
Regulators are discussing the possibility of requiring carriers to break out details on the retained-asset accounts on the financial statements the insurers file with state regulators.
Typically, insurers hold a beneficiaries’ death-benefit payment in a retained-asset account rather than sending a lump sum payment. Generally, the money is kept in the carriers’ general corporate account.
According to Paul Graham, chief actuary for the American Council of Life Insurers, funds in retained-asset accounts are invested in short term Treasury bills and overnight commercial paper.
However, the general account assets are also invested in other longer term investments, including long-term corporate bonds, commercial real estate, preferred stock, collateralized debt obligations and residential mortgage-backed securities.
The dollars in the retained-asset accounts aren’t segregated from the other general account assets, Mr. Graham said. But he noted that since the funds are held in an insurers’ general account, the assets are covered by state guaranty funds. Separate accounts aren’t covered.
While regulators want to single out the retained asset accounts for reporting, they’re concerned about what would happen if the assets were moved from the general accounts.
“We wouldn’t want any regulatory action to separate these accounts from the rigorous solvency protections we require of insurers,” Ms. Voss said.
“I think the regulators’ overall concern is greater than the retained asset accounts; it’s the insurance company managing its asset portfolio in such away that it can meet its liabilities,” Mr. Graham said. “The commissioners are making sure we’re not just all invested long with a bunch of short-term liabilities that would put companies at risk.”