Treasury wants to recapitalize insurers

The Department of the Treasury wants insurance companies to participate in its $700 billion bailout program —and it may take equity stakes in return, according to a report in The Wall Street Journal. Carriers, along with other financial services firms, are supposed to benefit from the Troubled Asset Relief Program, the taxpayer-funded bailout intended to remove toxic assets from institutions’ balance sheets. But insiders said that the Treasury Department wants carriers to participate in the second part of the bailout, in which the government will inject capital into companies by taking equity stakes. Insurers would need to have a federally regulated financial holding company in order to get a capital injection from the program. Monoline insurers, such as MBIA Inc. and Ambac Financial Group Inc., would probably be the first insurers up for help, noted Sean J. Egan, managing principal of Egan-Jones Ratings Co. in Haverford, Pa. "They're probably at the top of the list for the simple reason that their insurance extends to the financial sector," he said. "One of the key items needed to unfreeze the credit market is to increase lending. If the federal government is providing support to the monolines, it would provide relief to the banks," Mr. Egan said.