If every life insurer holding a federally chartered bank does get aid, that could remove "conceivably all" of the mounting uncertainty in the industry, said Robert Litan, an economist and senior fellow at the Brookings Institution.
It also should resolve industry fears about "bank run" scenarios in which the companies don't have the ready cash to pay out policies for people who have lost confidence in the system, Litan said. But other experts warn that instability in the passed-over companies could endanger the industry - a staple of consumer confidence and security - and pose grave threats to the broader financial system.
"It is fairly likely ... that we will see a few major life insurers that don't qualify for aid either fail or enter state receivership," said Kent Smetters, an insurance expert and professor at the University of Pennsylvania's Wharton School.
Excerpted from BismarckTribune.com.
