Actuary: Impact of Government Default on the Property & Casualty Insurance Industry Would Have Been Minimal

Financial analysis and actuarial firm says that the property and casualty insurance industry was unlikely to have been significantly effected if the U.S. Government had delayed payment of principal or interest on its obligations over the next twelve (12) months.
According to financial analysis and actuarial consulting firm Demotech, Inc., the property and casualty insurance industry may be uniquely poised to handle the fallout in the unlikely event that the United States government had postponed the payment of interest or principal on its near-term obligations – a looming but possibly "manufactured" crisis that was apparently staved off by a recent debt deal in the U.S. Congress.

With $150 billion invested in government debt, the P&C industry seemed vulnerable.
However, with about $150 billion in government debt-investments, the property and casualty insurance industry seemed vulnerable to a potential default by the U.S. Government, although a recent news release by Demotech says that less than $50 billion of those debt-investments mature in the next year.

Additionally, the amount of principal and interest due to the P&C industry in the next twelve (12) months represents only about three percent (3%) of the P&C industry's aproximately $1.3 trillion in aggregate cash and invested assets. Therefore, according to Demotech, the P&C industry was unlikely to have been adversely affected in any significant way if there had been a disruption in those cash flows.

A disruption in payments on government debt is only one potential aftereffect of a default.
However, a "disruption" in cash flows from the U.S. Government on its debt obligations is only one of the potential aftereffects of a U.S. Government default. For example, such a default could have caused a ripple effect through the investment markets and financial industries, the ultimate outcome of which is extraordinarily diffult to predict.

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1 comment:

  1. Thus, the issue of the constitutionality of the PPACA mandate appears to be on the fast track to the Supreme Court, and it may be before the Court in the 2012 term.