A number of financial writers have been predicting the insurance industry will be the next to go through a series of breakups and bankruptcies, just as the S & L industry did a number of years ago. 

The insurance industry is quick to claim the potential danger is greatly exaggerated and unjustified. Meanwhile, some insurance rating services have been downgrading their ratings in response to criticisms of excessively high ratings on companies that became insolvent. The National Association of Insurance Commissioners has also instituted a new "Risk Based Capital" formula to measure how much capital a company should have. 

Major change rarely comes from within an industry. It's often forced on the industry from outsiders. The insurance industry should be a business that makes bankers look like commodity traders by comparison. The bulk of the money entrusted to the industry should be invested in low risk, moderate yield investments like (1) government bonds, (2) top grade corporate bonds, (3) some preferred stocks, (4) high quality single family mortgages, and (4) a "blue chip" selection of big company stocks. 

NOTICE: This Information is intended only for educational purposes and may be regarded as controversial by some legal experts. Readers should consult with a qualified  professional who is familiar with their specific financial and tax circumstances before adopting any ideas that are discussed in this article.

About the author:

Vernon Jacobs is a CPA/CLU who works as a tax author and consultant.  He  writes a free email newsletter on asset protection and offshore topics.  He can be reached by phone at (913) 362-9667.