Bermuda’s books are mostly secret, so the public doesn’t know the details of what investments those companies hold. Researchers and regulators have identified ways in which the financial distress of a large insurer like MetLife can ripple through the entire financial system. “Large insurance conglomerates have historically had liabilities to other systemically important financial firms such as large banks,” Hunt said. “If the insurer defaults and cannot honor such contracts, it can contribute to the default of the other party to the contract in a downward domino effect similar to what we saw in the global financial crisis,” Hunt said.
MetLife’s head of communications, Dave Franecki, wrote in an email: “We appreciate you reaching out and walking through some of the topics.” But he declined to comment further: “MetLife will not provide an interview or comment on your story or the related series of stories published by 100Reporters,” Franecki said.
“The business model is based on fees for asset management. They have significantly increased investment risk,” he added, pouring more money into collateralized loan obligations and “more exotic types of investments.” These investments are less liquid and more volatile, he said.
The Unite Here union has warned of a growing risk to its members’ pensions, citing growing dependence on less liquid asset-backed securities and alternative investments to bring higher returns, the use of investment management agreements with their subsidiaries and the reinsurance of offshore liabilities. Unite Here has flagged the risk of systemic financial collapse.
“We believe that ultimately it will require state, federal, and international regulators to work together to protect the public from the risks of the insolvency of large life insurers and/or contagion to the larger financial system with which they are affiliated. interconnected,” Unite Here said in June. comment for the National Association of Insurance Commissioners (NAIC), which sets guidelines for state regulators overseeing the industry.
In a September 2021 report, the NAIC Financial Stability Task Force noted that when insurance firms invest in affiliated companies, the firms may increase the risk to their solvency. The same report also noted that insurance firms often fail to accurately disclose investments in related companies..
This report, i the second in the series on how Wall Street is making money in the insurance industry examines three types of risky investments that each company uses to increase its profits, drawing on annual reports filed with the Securities and Exchange Commission and state departments insurance, as well as collateral forms. Thomas Gober, a certified fraud investigator and former Mississippi Department of Insurance examiner who has advised the US Department of Justice on insurance fraud, reviewed the relevant documents for 100Reporters.
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