Risk Management

U.S. Insurers Report $3.5 Billion Enron Exposure

Most of the exposure was with life insurers holding fixed-income investments, S&P says.
Stephen TaubDecember 6, 2001

Where there are huge losses, there is usually scrutiny of the effects on insurance companies. And the Enron debacle is no different.

But so far, it seems like the insurance industry hasn’t been hurt much by the collapse of Enron. The direct exposure of U.S. insurers’ asset portfolios to securities issued by Enron Corp. and its affiliates is estimated to exceed $3.5 billion so far, according to Standard & Poor’s. The rating agency said the liability is not likely to negatively impact the insurers’ ratings, however.

“The exact total of insurers’ asset exposure will take some time to resolve, because many insurers liquidated some or all of their holdings in the weeks preceding Enron’s bankruptcy filing of Dec. 2, 2001,” S&P said in its press release. “But Standard & Poor’s estimates that most of this asset exposure–about $2.6 billion–was with life insurance companies at year-end 2000, primarily in fixed-income investments.”

Among the life insurers making early announcements of their exposure was John Hancock Life Insurance Co., which reported a net investment exposure of $320 million, for which it would be taking a fourth-quarter charge of up to $125 million.

4 Powerful Communication Strategies for Your Next Board Meeting