Many life insurance companies would definitely be at risk of going insolvent if there was a "run on the bank". Main scenario being a spike in interest rates. And that's including the ones that don't play games to bypass regulation. But it's unlikely to happen, and insurance companies don't have to give you your money right when you ask for it anyway
The current spike in short term rates (with yield inversion) has created some interesting observations in regards to leveraging cash values.
I personally have:
1. Policies with no Direct Recognition and variable rates
with different floors depending on product series (issue year).
2. Policies with direct recognition and fixed loan rates that are currently higher than short-term rates (with direct recognition, if I were to take a policy loan the dividend interest rate would increase for loaned values, as compared to current company dividend interest rates).
3. Policies with direct recognition and fixed loan rates that are currently lower than short-term rates (taking policy loans would result in a lower dividend crediting rate).
4. An insurance backed line of credit at Prime-1.25%.
I have seen clients shut down lines of credit (most aren't as low as mine). And I have strategically removed policies of type 1 from the line of credit backing. These insurance backed lines of credit are excellent assets on bank balance sheets, but I can see them being reduced at the current interest rate environment.