The New York Department of Financial Services has launched aninvestigation into financial arrangements between life insurers andcaptive insurance companies, the Wall Street Journal reports. Regulators believe certain insurers could be shiftingliabilities off their balance sheets onto affiliated companies,most of which are incorporated offshore or in other states and havefewer funding requirements than companies in New York.

The state is on the lookout for a weakening of solvencystandards for the insurance industry, lest another financial crisisshortchange insurers out of funds they need for future claimsobligations. The National Association of Insurance Commissionershas also begun a study on captives this year. The Department ofFinancial Services has sent letters to 80 life insurers requestinginformation about their financial arrangements with captives.

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