Heads Of Insurance Cos Criticize Use Of TARP Funds For Indus

Chief executives of the U.S. property-casualty insurance sector rejected proposals for the industry to receive federal bailout funds, a stark contrast to lobbying efforts by life insurance carriers to obtain access.

Liberty Mutual Chairman and Chief Executive Ted Kelly said receiving funds from the Troubled Asset Relief Program is a slippery slope that could potentially lead to strict government regulation and control.

Kelly spoke Friday in Washington at a conference hosted by a trade group, the Independent Insurance Brokers and Agents of America. Other chief executives on the conference panel included Mike McGavick of XL Capital Ltd.(XL), Glenn Renwick of Progressive Corp. (PGR) and Robert Restrepo of State Auto Financial Corp. (STFC).

While it's understandable that life insurance providers would want access to TARP funds, Kelly said, government bailouts of companies don't coincide with capitalist market philosophy. "Capitalism without failure is like religion without sin, it doesn't work," Kelly said, drawing laughs from the audience.

However, property-casualty insurers, such as Liberty Mutual, are subject to the financial constraints that brokers in the life-insurance sector have been exposed to. The life-insurance sector has been heavily invested in real estate and equities, compared to the property-casualty sector's fiscally conservative bond investments.

Nonetheless, life insurance carriers have been unsuccessful in their lobbying attempts to have Congress and the Obama administration grant brokers access to TARP funds.

Robert Rusbuldt, president of the trade group, said the financial strains faced by life insurers could deter an economic recovery for the sector.

"By law, you have to have auto insurance," Rusbuldt said, pointing that many consumers are evaluating whether household expenses, such as life insurance, are essential during the economic downturn.

Rusbuldt, along with the panel of CEOs, projected a property-casualty sector rebound by 2010, which could vary from sector to sector.

Overall "when the general economy starts to recover, you'll see the insurance industry take off," Rusbuldt said. New housing, car purchases and budding businesses create economic activity in the insurance industry, he added.

However, Kelly, along with the other chief executives expressed concern that future inflation two years down the line could spoil economic recovery.

"Inflation will be much worse than what we're experiencing right now," Kelly said.

-By Darrell A. Hughes, Dow Jones Newswires; 202-862-6684; [e-mail]