Anyone Know Insurance Company V. Bank Failure Rate?

[insurehound]

Does anyone know the number of of banks that have failed in the 20, 21st century versus life insurance companies? I'm guessing no because the definition of failure for insurance companies varies from state to state (each guarantee association has a different definition of what failure is) but I'd thought I would ask anyway.

I'm trying to demonstrate in a speech that the insurance industry has a better safety record than banks...if I can do that without losing my license

 

[insuranceexec]

Does anyone know the number of of banks that have failed in the 20, 21st century versus life insurance companies? I'm guessing no because the definition of failure for insurance companies varies from state to state (each guarantee association has a different definition of what failure is) but I'd thought I would ask anyway.

I'm trying to demonstrate in a speech that the insurance industry has a better safety record than banks...if I can do that without losing my license

Very good question. I have done some research on similar topic and found that less than 10% of banks are rated A- or better. I will have to get the source and will post tomorrow with it. I have also found that the requirements for an A rating of an insurance company is more stringent that that of banks. Again a very good question. I look forward to the responses from people more knowledgable than I.

</IMG>

 

[insurehound]

Thanks insuranceexec...speaking of speech, is an agent allowed to explain in a speech (not a sale) that we have a Guarantee Association similar to the FDIC? I can't see why not as it is fact.

 

[insuranceexec]

Thanks insuranceexec...speaking of speech, is an agent allowed to explain in a speech (not a sale) that we have a Guarantee Association similar to the FDIC? I can't see why not as it is fact.

Here in Arkansas we are not. I would check with your local department of Insurance and pose the question to them. It is told to me that by presenting the "guarantee association" prior to a sale you are indemnifying your particular state.

One thought you may want to consider is that of explaining what happened in 1989 with the FSLIC (Federal Savings & Loan Insurance Company) and they came out of bankruptcy with a new name of FDIC. You do not hear a great deal about this; would make for an interesting topic.

 

[SportsNut]

One thought you may want to consider is that of explaining what happened in 1989 with the FSLIC (Federal Savings & Loan Insurance Company) and they came out of bankruptcy with a new name of FDIC. You do not hear a great deal about this; would make for an interesting topic.

Whoops, not exactly on the facts there InsExec. FDIC was created by Congress in 1933... FSLIC was bankrupt in 1989 and abolished by Congress and the FIRREA and the Office of Thrift Supervision, known as OTS, was created.

FDIC absorbed the responsibilities for insuring deposits of Sav & Loans, the same as banks. At this same time is when insured deposits went from a limit of 40K insured, to 100K. Of course we know that this limit was recently, (and temporarily) raised to 250K, per depositor.

 

[insuranceexec]

Whoops, not exactly on the facts there InsExec. FDIC was created by Congress in 1933... FSLIC was bankrupt in 1989 and abolished by Congress and the FIRREA and the Office of Thrift Supervision, known as OTS, was created.

FDIC absorbed the responsibilities for insuring deposits of Sav & Loans, the same as banks. At this same time is when insured deposits went from a limit of 40K insured, to 100K. Of course we know that this limit was recently, (and temporarily) raised to 250K, per depositor.

The Federal Savings and Loan Insurance Corporation (FSLIC) was an institution that administered deposit insurance for savings and loan institutions in the United States. It was abolished in 1989 by the Financial Institutions Reform, Recovery and Enforcement Act, which passed responsibility for savings and loan deposit insurance to the Federal Deposit Insurance Corporation (FDIC).
The FSLIC was created as part of the National Housing Act of 1934 in order to insure deposits in savings and loans, a year after the FDIC was created to insure deposits in commercial banks. It was administered by the Federal Home Loan Bank Board (FHLBB).
In the 1980s, during the savings and loan crisis, the FSLIC became insolvent. It was recapitalized with taxpayer money several times, with $15 billion in 1986 and $10.75 billion in 1987. However, by 1989 it was insolvent to save and was abolished along with the FHLBB; and the FSLIC savings and loan deposit insurance responsibility was transferred to the FDIC.
Retrieved from "http://en.wikipedia.org/wiki/Federal_Savings_and_Loan_Insurance_Corporation"

My point being that many people have a false sense of security with the FDIC. A couple of questions here:

How much in researves are a member of the FDIC required to keep?

If the bank were to go insolvent; and I had more than the 250K, how long would it take me to get my money back?

 

[SportsNut]

My point being that many people have a false sense of security with the FDIC. A couple of questions here:

How much in researves are a member of the FDIC required to keep?

If the bank were to go insolvent; and I had more than the 250K, how long would it take me to get my money back?

Not sure on the reserves, except to say that with fraction reserves banking, it isn't much. That is good and bad, but in times of liquidity crisis like today, it is surely bad. You can read plenty about it here.

The answer to your second question is more absolute. It depends... on what type of acct that it is, and whether it is an individual acct or a joint acct, which would be insured up to 250K EACH, or 500K total. IRA and other retirement accts are added together and insured for up to another 250K, regardless of your other deposits... But back to your question... lets say you are single, and have 400K on deposit and your bank fails. Your only hope of getting the surplus 150K back is if the institution is liquidated and there are surplus funds. OR, the plain answer is... it isn't going to happen, you will never see the surplus funds. If they had surplus funds they wouldn't be insolvent to begin with... so never is the answer. Essentially the excess amount becomes an unsecured claim of the bank, and we know what happens to them in receivership.

 

[motoxxx]

I don't know the answer to the original question but I can tell you that all of my bank/bond/IRA investments are in the toilet but my whole life policy is still going up in value! Other than my precious metals investing, my whole life policy has been my most impressive investment.
- - - - - - - - - - - - - - - - - -
Not sure why it wouldn't let me edit my post just now but here is what I wanted to finish saying:

I don't know the answer to the original question but I can tell you that all of my bank/bond/IRA investments are in the toilet but my whole life policy is still going up in value! Other than my precious metals investing, my whole life policy has been my most impressive investment. I know that the company I have my whole life policy with has been around longer than most banks and that most life insurance companies only have to pay out on about 2% of life insurance policies so I would say that in general they are more stable than banks.
Fannie Mae and Freddie Mack were lending out 30:1 on the money had they in reserves and look where they are today. My guess would be that when the real number about insurance companies vs. banks are found, my money would be on the insurance companies.

 

[padthaiforlunch]

Before you start a Chicken Little dance about bank failures, you need to consider the last time a bank failed and the depositor did NOT get paid in a timely fashion.

Talk of losing money due to bank failure is easily construed as a scare tactic.

Now if all you want to do is show how insurance companies tend to be financially stronger than banks, then you can find the list of bank failures (including whichever went under last Friday) you can go here:

FDIC

For insurance company failures, Weiss keeps track. You can start Here

 

[arnguy]

Insuranceexec, agents are prohibited from mentioning the Guarantee Association here in Pennsylvania.

Padthaiforlunch, isn't there more current information than that web page from Weiss? That info shown is just over
6 years old!