The New York insurance superintendant has reassured AIG customers on the validity of their policies
AIG's insurance companies are financially sound, with substantially more in assets than they need to pay all valid present and projected claims, Insurance Superintendant Eric Dinallo reassured New York policyholders.
Dinallo reminded insurers, agents and brokers, of their responsibility to inform consumers of the possible costs of switching life insurance, annuity and other policies.
‘Don't worry and don't make any rash decisions if you have a policy issued by an AIG insurance company," Dinallo said. "All your covered claims will be paid and all your annuity checks will come. Making sure insurance companies are solvent and able to pay every valid claim is my number one job, and the AIG insurance companies are strong and solvent.’
Dinallo explained that the trouble with AIG is largely with AIG's non-insurance parent company, which is not held to the same investment, accounting and capital adequacy standards as its state-regulated insurance subsidiaries.
‘As regulators, we make sure the assets of the insurance companies are walled off, protected from the parent company's troubles and available to pay all your covered claims,’ he said.
Non-insurance entities are not subject to the strict solvency framework applied to insurers.
AIG got into financial trouble because various parts of its non-insurance business, which were not regulated to the same degree as its insurance subsidiaries, engaged in risky credit transactions. They took huge positions in credit derivative swaps on mortgage-backed securities without the appropriate limits and minimum capital/surplus to protect the company from a downswing in the mortgage-backed security markets.