Insurers Cautious Of TARP Aid

The Federal Reserve may have finally agreed to open its coffers to bail out troubled insurers, but many of the eligible firms are already looking to reject the offer.

In order to ease concerns regarding the financial health of the sector, the government said six insurers, including big names like Hartford (HIG), Prudential (PRU), Lincoln National (LNC) and Principal Financial Group (PFG), were entitled to receive $22 billion in emergency funds under its Troubled Assets Relief Program (TARP) program.

Minneapolis-based insurer Ameriprise Financial (AMP), which also won approval for federal support, has already turned down the offer saying it already has more than $1 billion in excess capital. According to the Wall Street Journal, Prudential Financial is expected to follow suit. Allstate (ALL) has also said it was considering its options.

So far, industry insiders consider Hartford Financial and Lincoln National as the two companies likely to settle for government intervention to meet their capital needs, as it would be difficult for them to raise equity at their modest valuations. Both firms have said their acceptance is subject to review of the final terms.

After the largest banks in the nation underwent regulatory stress tests and many of them are now struggling to refund taxpayers’ money, insurers are naturally weighing their options well - whether to opt for the government as an investor by accepting capital essential for their survival or to stay off and save themselves from related complications.

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