The aim of life insurance companies in the 21st Century is to provide investments. And perhaps they will have enough in reserve to pay beneficiaries upon the death of their policyholders.
Perhaps not.
Life insurance companies have transmogrified their industry. They no longer focus on issuing an insurance policy backed by reserves. They focus on decreasing their reserves so that they can make investments and attract shareholders by paying dividends. And paying the officers at the company.
Statutory accounting has until recently required high levels of reserves except when State Insurance Commissioners grant waivers, also known as deviations. Captive reinsurance companies are a prime source of deviations from statutory accounting.
The complicated schemes are explored by Mary Williams Walsh in an informative article on “Risky Moves in the Game of Life Insurance / Complex and Mostly Hidden Maneuvers May End Up Costing Taxpayers and Policyholders” p. 1, col. 1 (New York Times Nat’l ed., “SundayBusiness” Section, Sunday, April 12, 2015), noting among other things, that “more and more money has flowed away from policyholder reserves and into the hands of investors.”
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