U.S. life insurers have plenty of liquidity

Though life insurance companies took a beating in 2008, resulting in lowered risk-based-capital ratios, Moody’s Investors Service says most companies had enough liquidity following the crisis to withstand severe stress.
The ratings agency performed a yearlong global liquidity stress test on life insurance operating companies, running from the end of 2008 to the end of 2009. The results, released Wednesday, were fairly surprising.
Moody’s found that life carriers in North America had the lowest median ratio of liquid assets to liquid liabilities compared with insurers in other parts of the globe. The median ratio for insurers in North America was 208%, with one carrier’s ratio of liquid assets to liquid liabilities falling as low as 144%. Moody’s noted that while the ratio was indeed the lowest, it was still considered good.
The ratio was much higher in Asia, excluding Japan, at 331%.
Insurers in the United States also had the highest level of exposure to realized losses. In a measurement of median ratios for realized gains or losses to assets and realized gains or losses to equity, companies in the U.S. had a median ratio of a 20% loss of equity.
However, the ratings agency noted that accounting differences in reporting book and market values may be the reason U.S. insurers trailed their foreign peers in assets-to-liabilities and exposure to realized losses.