A New Mega Insurance Company, To Big To Fail Agian?

[WhiskeyGirl]

Why do taxpayers always seem to get stuck with the risk and not the rewards?  When does Washington start working for the little people again?

A new insurance company, whose executives say they are intent on becoming the largest independent career agent distribution group, is expected to be launched by a group of private equity investors next year.

The company’s focus is on an area of the insurance market that has had a “scarcity of distribution,” according to a statement from Hildebrand, who worked for New York Life in a number of leadership roles over a 30-year career ending in 2007.

The investors backing the effort include affiliates of The Blackstone Group, Goldman Sachs and Credit Suisse.

http://ifawebnews.com/2009/07/08/new-insurance-company-to-target-small-business-middle-income-market/

Will all these agents and products be regulated by the states?  Or, is this another 'plum' for politicians in Washington to monoitor and regulate?

[WhiskeyGirl]

Firms including Goldman Sachs and Morgan Stanley have been investing in middlemen to generate fee income from insurance without taking on the risk of losses on investment portfolios backing policies. Insurers including Hartford Financial Services Group Inc., Liberty Mutual Group Inc. and Unum Group have been seeking to add smaller customers as larger clients pressured by the recession use their scale to demand lower rates.

http://www.bloomberg.com/apps/news?pid=20601103&sid=as.BRnlVf28Y

Privatize profits, socialize losses?

How much in fees are they planning to collect?  IIRC, the love of 'fee' generation added to the mortgage and banking crisis. 

How many fees?  Who is ultimately responsible for this business when it goes bad?

[WhiskeyGirl]

Blackstone, Goldman Sachs and Credit Suisse will own about 80 percent of Insphere, Hildebrand said. Sales agents will own 12 percent to 15 percent of the company, and management the rest, he said.

Insphere will sell policies created by HealthMarkets, as well as those of ING Groep NV, the Dutch bank and insurer, and is in talks to add products from more insurers, Hildebrand said. The company defines middle-income customers as those earning $50,000 to $250,000 a year.

One insurer whose products Insphere won’t initially market is American International Group Inc., Hildebrand said. The New York-based insurer has taken a federal bailout valued at $182.5 billion and reported about $100 billion in net losses last year after bad bets tied to housing markets.

http://www.bloomberg.com/apps/news?pid=20601103&sid=as.BRnlVf28Y

Taxpayers get the husk that is left of AIG, big banks got the gold and pass through payments, and what will taxpayers get of this new business?  Losses?  The shaft?

Who will regulate these policies to ensure they are financially sound?  Who will keep the insurance company honest?  The Treasury?  Federal Reserve?

[WhiskeyGirl]

The article notes that top Wall Street firms are investing in companies that can rake in fees on insurance policies without the investment liability. The new firm will formally launch in January. This is certainly a sign that Goldman Sachs is back to making some savvy principal investments. Obviously, the path to a profitable exit is long and arduous, but you have to wonder what the pipeline looks like.

http://www.fiercefinance.com/story/big-banks-back-small-insurance-firm/2009-07-09

Dallas-based Insphere plans to be up and running by 2010. It is close to signing a marketing agreement with ING Groep NV (ING.AS) to offer ING's term life and universal life products, and is in discussions with a number of other life, health, long-term care and retirement carriers, the company said in a statement. (Reporting by Lilla Zuill, editing by Gerald E. McCormick)

http://www.reuters.com/article/marketsNews/idUSN0729380820090707

Who will keep the fee makers honest?  This new insurance company?  A shell selling someone elses products?