Failure of Mutual Benefit Life (1991)
A New Jersey life insurer placed in rehabilitation in July 1991 after real estate losses and a policyholder run, at the time the largest US life insurer failure.
Mutual Benefit Life, founded in 1845, had concentrated a share of its investments in commercial real estate and mortgages, well above the industry average, to credit competitive returns on its savings contracts. The turn in the property market eroded its capital, and policyholder anxiety, fed by the failure of Executive Life three months earlier, set off surrender requests that illiquid assets could not meet. The regulator placed it in rehabilitation, which halts surrenders and buys time to restructure the portfolio. The case shows that asset liquidity has to match liability liquidity: a contract surrenderable at any time funded by an office building is a liquidity mismatch, not merely a market risk.
On July 16, 1991, Mutual Benefit Life, then the eighteenth-largest US life insurer, was placed in rehabilitation under the supervision of the New Jersey insurance regulator. Its in-force policies were transferred on May 1, 1994 to MBL Life Assurance Corporation, and the original company was liquidated and dissolved on June 14, 2001.
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