Recently, the United States Treasury Department (the “Treasury”) has announced that certain life insurers that have acquired banks and thrifts are eligible to receive assistance from the Capital Purchase Program, a sub-program of the Troubled Asset Relief Program. This news was much anticipated and comes with great relief for those life insurers that have experienced steep declines in their capital cushions and are facing downgrades in their credit ratings.
Although details regarding which life insurers will qualify for assistance and how the amounts of assistance will be calculated have not been released, Treasury spokesperson Andrew Williams told media sources that “[t]here are a [small] number of life insurers that have met requirements for the Capital Purchase Program” because of their status as a holding company of a bank or a savings and loan association. Since last Fall, some life insurers who have sought and received approval from regulators to acquire banks or savings and loan associations, creating a path for them to participate in the Capital Purchase Program (the "CPP"). The announced assistance, according to Mr. Williams, does not constitute a new rescue program for the insurance industry, but rather a continuation of the capital investment plan used to keep the banking industry afloat.
We will continue to track further developments regarding this extension of the CPP.