NU Online News Service, MAY 18, 3:55 p.m. EDT
WASHINGTON–The Property Casualty Insurers Association of America (PCI) is asking the Treasury Department to "tread carefully" in providing financial aid to life insurers with property-casualty operations so as to ensure those receiving such aid don't wind up with an unfair competitive advantage.
The statement by David Sampson, PCI president and chief executive officer, was moderate in tone. It was prompted by Treasury's announcement Thursday that it had preliminarily agreed to provide financial assistance under the Capital Purchase Program for six insurers.
In addition to property-casualty insurer Allstate Insurance Company, firms on the list include the Hartford Insurance Group, which has a p-c operation. Hartford said it will accept $3.4 billion in aid under the program.
Allstate did not indicate how much it was eligible for, and issued a statement that analysts interpreted as indicating it was leaning toward not participating in the program, a component of the Troubled Asset Relief Program.
Specifically, Allstate said its capital position has improved, and noted that it had recently raised funds in the private capital markets. But the Allstate statement did not rule it out completely.
In his statement, Mr. Sampson said he hopes the Treasury Department will take steps to ensure "this funding does not give any of these insurers' property-casualty divisions an artificial competitive advantage over fiscally sound property-casualty companies who do not need federal rescue funds."
"If Treasury's funding of life insurers is used to prop up the companies' ability to retain unsustainable short-term market share in their other lines of business, such as property-casualty insurance, that would undermine fair competition and the overall health of the industry," Mr. Sampson said.
"The results for consumers and taxpayers would be more risk, higher costs, less competition and an increasing reliance on government intervention and resources," he said.
PCI has said its members aren't seeking TARP cash and are concerned that those who do receive such aid could potentially win an unfair competitive advantage.
In his statement, Mr. Sampson said PCI members, despite the challenges of the economic downturn, "remain the safest and strongest financial sanctuary in the current storm."
"Property-casualty insurers have behaved responsibly and continue to be generally well-capitalized and managed, providing sound and secure products to consumers," the statement added.
In addition, Mr. Sampson said, "we are highly regulated at the state level for solvency" and "believe that such government intervention would actually harm consumers and the vast majority of responsible insurers."
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