Friday, February 27, 2009

Looming Crisis for Insurance Companies?

With indications of needs for continuing bailout at AIG, the spotlight has turned from banks to insurance companies as potential sources of crisis. As we can see from the insurance index above ($KIX), that sector has been more than cut in half since September and is now sitting at bear market lows, below its declining 40-day VWAP (green line).

One economic factor that could turn recession into depression for millions of families would be the loss of life insurance and retirement annuity benefits that many families depend upon. With financial ratings of life insurers being cut and no clear indications of government support, this may be the unappreciated side of the current financial crisis.