Will insurers get US funds?

Treasury Secretary Henry Paulson said on Tuesday that he had not yet decided whether other insurers would get federal funds. The only insurer to get government help so far is AIG, which has received government facilities totalling $152 billion.

Some life insurance companies are hoping they could be eligible for U.S. federal government finance. They argue federal funds could stabilise their trillions in investments and warn that any failure of a life insurer could dry up a key source of corporate financing, article by Reuters says.

While no big life insurer has collapsed, a failure would shrink bond financing, potentially creating another hurdle to economic recovery.

Hartford Financial Services Group Inc, which sells both life and property insurance, reported a $2.6 billion quarterly loss on 30 October, the 189-year-old insurer's worst-ever result, mainly from bad investments in financial companies.

Prudential Financial Inc, the No. 2 U.S. life insurer, had a $108 million net loss, and withdrew its 2008 earnings forecast, citing market volatility. Genworth, a smaller insurer, recorded a $258 million net loss.

Analysts warned that the fourth-quarter outlook for the sector is even gloomier, with growing concerns that their investments in commercial mortgages will lead to more red ink as values drop.

Life insurers had more than $1.8 trillion invested in corporate bonds, $462 billion in government bonds, $302 billion in commercial mortgage investments and $20 billion in real estate holdings at the end of 2007, according to the American Council of Life Insurers (ACLI).

"Life insurers are the number one purchasers of corporate bonds," said Jack Dolan, an ACLI spokesman. "They grease the wheels for financing corporate America. In essence, they are the wholesalers of credit, while banks are the retailers," he said.