A New York and New Jersey Lawyer Who Represents Policyholders and Beneficiaries in Life Insurance Denial Cases

The New York Times published a fascinating article about risky investments made by life insurance companies that can put their insureds, as well as taxpayers, at financial risk. The gist of the story is that life insurance companies are supposed to plunk their money–essentially, the premiums they receive–into rather dull, safe investments so that there is a guarantee they can pay death benefits when a claim is made. But that is not what is happening.

For instance, Athene did the opposite by investing in Caesar’s Casinos which was on the verge of bankruptcy. Actually, it was not Athene that made the investment, but its parent company Apollo Global Management, a large private equity firm. I know these characters – I litigated against them (and won) when they tried to cancel a client’s life insurance policy after he paid late when his mother passed away.  Anyway, the operating company that runs Caesar’s later went bankrupt. Investing in Caesar’s was not exactly the same as, say, investment-grade bonds.

The article is interesting because it sets forth the unsavory history of life insurance, such as “feeble, penniless old men” having to auction their policies to speculators so that they could survive, prompting a later reform that insurers must pay a surrender value to insureds with cash value policies. Reforms were enacted early in the 20th century, but now we see insurers become public companies and produce a vast, overwhelming array of products that are difficult to understand even more the seasoned life insurance adviser. Meanwhile, as insurers put their assets into more risky investments, state insurance regulators have more or less given the green light.

The latter half explores the complex world of captive insurance companies into which, through dizzying financial machinations and subterfuges, insurance companies create subsidiaries into which they funnel assets for tax and regulatory purposes. The books look different for insurers who create captives, but since the captive is under the control of the insurer, the risk remains the same.

Take a look, the article is well worth a read.



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