I haven't talked about this topic on this blog, but have had many conversations with many people about the coming insurance crises. The problem is many fold. For one the accounting is mostly mark to historical cost. What that means is that if you buy a bond at par (at 100) and it goes to 70 you still mark it at par. As a result the insurance companies have not been in the spotlight since it isn't screamingly clear that they have issues. This also causes the issue of the problem being bigger than it otherwise would be since it is ignored longer. You also have the issue that the insurers are regulated at the state level, not the federal level. As a result, there is no set designated way for the federal government to bailout the insurers, unlike the banks. Thanks goes to Pete.
The tumbling financial markets are dragging down the life-insurance industry, an important cog in the U.S. economy, as mounting losses weaken the companies' capital and erode investor confidence.
Some of the hardest-hit companies are century-old names that insure the lives of millions of Americans. Shares of Hartford Financial Services Group Inc., which already received a capital injection from German insurer Allianz, are down 93% as of Wednesday's close from their 52-week high. MetLife Inc. and Prudential Financial Inc. are both suffering as the value of their vast investment portfolios declines.