Finding safe insurance companies
The insurance sector is suffering.
Analysts say there a couple reasons for this:
1. Exposure to real estate, mortgage backed securities in their portfolios
2. VAs. Those pesky little investments are putting a strain on capital at some of the insurance companies. While their portfolios take a major hit, insurance companies are still paying those 3 percent guarantees on some VAs.
Are financial advisors taking a harder look at what insurance companies they do business with? I spoke with an analyst who said you should be doing just as much research on a life policy, for example, as you would a stock these days.
Also, are you currently doing any business with insurance companies that are rocky right now?
What's your plan by chance the company your clients hold policies from is deemed insolvent?
Looking to speak with advisors who've thought about any of this.
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You don't understand VA's very well, do you? Nor do you understand what happens when an insurance company goes under.
That's all true.
Still, any advisors out there spending extra time determining which insurance companies are safe enough to do business with?
The problem is, if we as advisors use a "safe" company today, it doesn't mean the company can't be gone a year from now.
When choosing an insurance company for VAs, life, LTC, etc. I do make sure they have a good rating and I explain to the client that we are choosing a highly rated insurance company. As always I disclose that the policy/benefit is only as good as the company backing it and there are no guarantees.
I don't know how much more we as Advisors can do beyond that. I'm not an insurance analyst and I can only use information provided to me by third party research (Moodys, Fitch. S&P).