California officials predict that Standard & Poor’s (S&P) recent downgrade on the credit rating of U.S. government securities will not affect life insurers’ dealings with their consumers in the state.

Dave Jones

Life insurers own $5 trillion in stocks, bonds, mortgages, real estate and assorted other investments in the U.S., according to Brad Wenger, president of the Association of California Life and Health Insurance Companies. He said in California, life insurers own $546 billion.

“The diversity of the industry’s assets will see them through this economic downturn as it did through multiple wars and depressions,” Wenger said in a statement. California Insurance Commissioner Dave Jones “was clear and unequivocal when he confirmed that the promises life insurance companies make to consumers will be kept. Like every other segment of the U.S. economy, insurers are addressing serious economic challenges, but that’s nothing new for an industry that’s been around for hundreds of years.”

Standard & Poor’s lowered its long-term sovereign credit rating on the U.S. to “AA+” from “AAA,” it announced late July 5, three days after congressional Democrats and Republicans and President Barack Obama forged a deal on the federal deficit ceiling. The ratings service also said that the outlook on the long-term rating is “negative.”

Although S&P did issue a credit rating downgrade, its rating of AA+ is still a “very strong financial rating,” Jones said in a statement.

“These rating actions have no impact on insurer investments in U.S. government and government-related securities and therefore no impact on insurers’ financial reporting of risk-based capital and asset valuation reserves,” Jones said. “Further, S&P’s downgrade to AA+ has no impact on insurers’ claims paying abilities.”

Jones said the state insurance department and insurance regulators will continue to oversee insurers’ financial condition.