A team that helps the U.S. Treasury Department monitor potential threats to the financial system is scoffing at the idea that life and annuity issuers are immune to “runs on the bank” and other causes of sudden failure.

The department’s Office of Financial Research has included a new section on how life insurers can collapse in its latest annual report to Congress.

“Most life insurance companies have cash and short-term assets that are a modest fraction of total assets,” analysts say.

“A sufficiently rapid and unexpected withdrawal during periods of stress at the institution or in financial markets could lead to a fire sale of assets, with an associated effect on market prices and volatility.”

“These measures [surrender charges] may be insufficient when concerns about an insurance company’s soundness are acute,” the analysts say. -sjm