
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, April 10, 1991                   TAG: 9104100185
SECTION: BUSINESS                    PAGE: B-7   EDITION: METRO 
SOURCE: The Washington Post
DATELINE:                                 LENGTH: Medium

INSURANCE HOLDING COMPANY FALTERS

Policyholders at troubled First Executive Corp., whose subsidiaries have written billions of dollars in insurance over the past decade and invested much of the money in junk bonds, may be unable to collect some of their benefits if the company fails, according to insurance industry experts.

Although the insurance industry prides itself on its ability to protect policyholders when firms fail, First Executive's size, the high values of its policies and what may be a large loophole in a new California law are raising fears among regulators, consumer advocates and some industry officials.

First Executive Corp., which is a holding company for several subsidiaries, including Executive Life Insurance Co. and Executive Life Insurance Co. of New York, lost $366 million last year. The company operates nationwide.

First Executive subsidiaries now have about $49 billion of insurance in force through some 300,000 policies. Its New York company last week was ordered to stop selling new policies and to bolster its reserves.

A First Executive spokesman said the company has $2 billion in cash and government securities on hand, and is negotiating to sell its life insurance business to the Hartford Group. It is also talking with an unidentified European financial institution. The spokesman would give no details, but said that if a deal is reached it would be "significant."

Industry officials hastened Monday to say that it is not a foregone conclusion that First Executive will fail. And if it does, they noted, there will be immense pressure on the industry to try to make good on the Los Angeles-based firm's policies. Any losses to customers would be a major setback to the industry, which has been fighting hard to prevent Congress from rewriting the nation's insurance regulatory system.

The industry's view is that state regulators do a good job, and a state-based guaranty-fund system is adequate to protect policyholders if a company goes under. But guaranty funds are based on assessments levied on member companies, and most states limit the amount that can be imposed annually, so that a large failure might take years to pay off.

by CNB