Regulatory reform will cost life insurers: analyst

The tax impact on carriers will encompass about 1% to 2% of their total earnings, assuming an annual tax of about 4 basis points.
AUG 31, 2010
While the financial-reform bill largely targets banks and brokerages, life insurers can still expect to be on the hook to help pay for its implementation. MetLife Inc., Prudential Financial Inc. and Lincoln National Corp. are among the life insurers that likely will face a tax beginning late next year that's aimed at covering some of the regulatory-reform package's costs, according to Jeffrey Schuman, an analyst for Keefe Bruyette & Woods Inc. In a research note to clients, Mr. Schuman said the tax, which will be spread over four years, will total at least $19 billion and will be levied on financial companies with more than $50 billion in assets under management, and hedge funds with more than $10 billion. The impact on the carriers will encompass about 1% to 2% of their total earnings, assuming an annual tax of about 4 basis points. The bill's rules on derivatives may also increase costs for life insurers, Mr. Schuman wrote. Specifically, the rules call for many derivatives transactions to be cleared through a clearinghouse and traded through an exchange. As a result, carriers, who use the derivatives for hedging risk, may face higher costs, according to Mr. Schuman's note. The rules also require that the Securities and Exchange Commission and the Commodity Futures Trading Commission oversee the clearinghouse; currently, state regulators oversee insurers' derivatives activity. The American Council of Life Insurers has opposed the new regulations, arguing that the carriers' derivatives activity doesn't pose a systemic risk.

Latest News

Merrill lands four advisor teams as May recruiting data shows firm's two-way churn
Merrill lands four advisor teams as May recruiting data shows firm's two-way churn

Merrill's latest hires span Colorado to Louisiana, even as industry-wide recruiting data suggests the firm is losing almost as many advisors as it gains.

Fund manager sues Kandeo, alleges $100 million FinSocial loss
Fund manager sues Kandeo, alleges $100 million FinSocial loss

The $36 million buy allegedly hid inflated books and a $50 million diversion.

Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit
Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit

“An award citing emotional distress is very unusual,” an industry executive said.

Workplace financial education linked to stronger financial habits, but participation remains low
Workplace financial education linked to stronger financial habits, but participation remains low

New EBRI research found workers who participated in employer financial education reported higher confidence, literacy and financial satisfaction.

The rise of the super advisor: How AI is redefining competitive advantage in wealth management
The rise of the super advisor: How AI is redefining competitive advantage in wealth management

Beyond operational excellence, the winning advisors of the future are the ones who can reach across multiple disciplines without discarding specialist skills.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income