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We often debate insurer ratings in the context of LTCi, annuities, etc. In that context, the following op ed in The Washington Post is quite concerning. I have provided the link to the op ed as well as some excerpts to give the general idea -
"...a defined-benefit pension at work or bought an annuity from a life insurer. No one ever asked them whether they would like to have their nest eggs moved offshore, or leveraged, or put in the hands of a non-U.S. regulator.
But increasingly, this is what’s happening. Countless Americans now depend on the skill and dedication of the Bermuda Monetary Authority, and they don’t even know it.
"In recent years, many of the American companies that were still operating employee pension plans have sold them off to life insurance firms. This has quietly changed things for the pension recipients: They still receive the same amount of money, but their pensions are no longer covered by federal law and insured by the federally chartered Pension Benefit Guaranty Corporation. State insurance law kicks in, and this varies from state to state.
Then, very often, the life insurers pay reinsurers in Bermuda to take over the obligations, under a whole new set of laws and investment rules.
"It’s not just pensions. Life insurers are also reinsuring the annuities they’ve sold to retirees directly. They package the contracts into “blocks,” then reinsure the blocks, often in Bermuda.
US tax policy encourages reincorporation in Bermuda. It's not just insurance companies that have been chased offshore -- for example, Ingersoll Rand, Tyco International, Nabors Industries, Foster Wheeler, Noble Corporation, and Weatherford International reincorporated in Bermuda.
I agree. As P.J. O’Rourke might say, we have a Parliament of (Wh…es) as the lawmakers, so I don’t expect much better from them. But, the article (and the phenomenon) is a newer development and (similar but) a bit different from companies incorporating in Bermuda. The pensions and annuity obligations being sold as (reverse of) CDOs and CMOs (mortgage-backed securities to the uninitiated) isn’t something we have heard a great deal about. People tout the ratings of the sellers of these instruments on this forum, possibly unaware that the obligation might have been sold to another party - possibly outside the reach of the US regulators. And, if the foreign owner of the obligation defaults, various warranties that people rely on might not hold.
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