Too Big To Fail?

I came across this video at The Candid Blogger's blog. I don't really know who this guy, Walter Burien is, but I think he is a bit of a kook. I don't understand all that he is talking about (and I am not going to take the time to figure it out now), but he brings up a couple of interesting points, primarily about the ties that local governments, pension funds, and the federal government have to big insurance companies. These are ties that I have not heard much about, if anything, in the news or on the blogs.

The government mandates that insurance companies maintain large reserves of money so that they can pay off in the event of major disasters. Local governments (retirement funds, rainy day funds) invest lots of money in insurance companies because they are "safe investments". The insurance companies, in turn, buy government investments (treasury bonds, etc.) at rates higher than they pay to their investors.

What happens if insurance companies fail? They will try to cash in their government investments? Big run on the government treasury? Local governments will try to pull their money out of the insurance companies? Will they get it? Are we looking at a potential meltdown of government entities if big insurance companies fail? Are they too big to fail also?

I'm just asking?