Sound familiar?

In June I reported on the rise of "captive reinsurance", which essentially allows insurance companies to re-insure their own policies rather than through an independent company.  This practice, which is quite complex, increases the company's risk while allowing the company to report higher profits, much like the practices that led to the Great Recession.  Moody's has estimated that captive reinsurance had artificially bolstered life insurers’ balance sheets by $324 billion.

There are other changes advocated and practiced by some insurance companies.  These changes are considered by the companies as “principle-based reserving".  Certainly, the idea of these practices being based on "principle" is laughable.  One of the principles is to allow actuaries to use their own data and assumptions rather than the current standards.  Another is to offer "universal life" policies which offer both death benefits and a cash value to policyholders.

New York doesn't like these changes and is proposing that insurance companies increase reserves by $4 billion.