New York financial regulators will soon order major life insurers in the state to set aside a total of $4bn to add to their reserves, following violation of new insurance claims rules.
The regulators said that life insurers were not maintaining adequate reserves to pay claims, which is a direct violation of insurance regulations, as reported by The New York Times.
It is believed that many insurers have been indulging in secretive transactions to boost their balance sheets, often through shell companies in other states or nations.
The required amount of reserves is to back the universal life insurance product that comes with secondary guarantees.
The highly flexible insurance product, which is sold by Lincoln National, Genworth, Principal, John Hancock, US Life and Sun Life, offers both death benefits and a cash value to policyholders.
The amount that each company will have to shell out and the time limit remained undisclosed.
The decision, if backed by insurance regulators in other states, could increase the total amount that is required to be added to reserves.
Meanwhile, sources were reported by the news agency as saying that the requirement may not result in halting operations in the state, but might lead to collecting extra fees for the insurance product in future.
