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Sept. 17, 2008
IBA West Member:
The following are statements issued today by IBA West’s national
affiliate, the Independent Insurance Agents & Brokers of America
(The Big "I") and the California Department of Insurance
regarding the Federal Reserve’s announcement last night that the
Federal Reserve Bank of New York will make an $85 billion
short-term bridge loan for 24 months to American International
Group, secured by all the assets of AIG. We will have additional
information in this week’s Weekly Insider.
“The loan is welcome news in the face of the escalating concern
about the potential impact of AIG’s economic challenges, which
has dominated the news for days, fueling speculation about the
future of the company and debate about the public policy of a
government bail-out.
“The complex corporate structure of AIG has resulted in
confusion by some about the distinction between the parent
company’s financial strength and the ability of its insurance
businesses to meet their obligations to policyholders. The loan
provides AIG with needed liquidity, averting a crisis that could
have set off a cascade of repercussions across the financial
markets. On the other hand, its insurance businesses are
separate units or subsidiaries that are restricted from
transferring assets to related entities without regulatory
approval to facilitate their ability to pay claims.
“IIABA does not believe that the AIG situation will have a
domino effect on the insurance industry. Independent insurance
agents and brokers across the country will continue to focus on
the consumer and know the state guaranty funds in all 50 states
serve as important protection for policyholders. Virtually all
experts agree the insurance subsidiaries of AIG are
fundamentally sound.”
Insurance Commissioner Steve Poizner issued the following
statement regarding the two dozen companies under the AIG
corporate umbrella that are licensed to sell insurance in
California.
“I have made monitoring the AIG issue the No. 1 priority of my
department. The Federal action offers maximum protection for AIG
insurance customers in California and elsewhere. The loan does
not create any lien obligations on any of the AIG insurance
assets, ensuring that their claims-paying capacity remains
strong.
“Even prior to action taken by the Federal government, the
companies owned by AIG had the risk-based capital required to
operate in the California market. The financial issues all come
from the parent company, AIG, and not its subsidiary insurance
companies. The AIG-affiliated insurance companies remain solid.
We will continue to closely monitor these companies for any
changes in their financial condition.
“Should AIG decide to sell any of the insurance companies
domiciled in California or those that do business in California,
I will closely scrutinize those proposed sales to ensure that
consumers receive the protections they deserve.
“Because insurance companies are regulated by the state in which
they are domiciled, New York bears the brunt of this regulatory
work load. I called my counterpart in New York earlier in the
week to offer assistance. He deserves a lot of credit for
negotiating a deal that provides maximum protection to
policyholders and soothes concerns of the financial markets. We
will also continue communicating and working with the National
Association of Insurance Commissioners, the body that routinely
coordinates the actions of the state Insurance Commissioners.”
Background Facts:
• In 2007, AIG was a significant player in the California
insurance market. AIG-owned companies had 1.5 percent of the
homeowners insurance market ($98 million in written premiums), 8
percent of the workers compensation market ($725 million in
written premiums) and 7 percent of the auto insurance market
($1.5 billion in written premium).
• Generally, the California Department of Insurance (CDI)
regulates individual insurance companies and not their holding
companies.
• AIG owns more than two dozen companies licensed to transact
insurance in California. Those companies are 21st Century
Casualty Company; 21st Century Insurance Company; AIG Casualty
Company; AIG Centennial Insurance Company; AIG Premier Insurance
Company; AIU Insurance Company; American General Indemnity
Company; American Home Assurance Company; American International
Insurance Company Of California, Inc.; Birmingham Fire Insurance
Company Of Pennsylvania; Commerce And Industry Insurance
Company; GE Auto & Home Assurance Company; GE Indemnity
Insurance Company; Granite State Insurance Company; Hartford
Steam Boiler Inspection And Insurance Company; Insurance Company
Of The State Of Pennsylvania; Landmark Insurance Company;
National Union Fire Insurance Company Of Pittsburgh, Pa; New
Hampshire Insurance Company; Pacific Assurance; Putnam
Reinsurance Company; Transatlantic Reinsurance Company; United
Guaranty Commercial Insurance Co. Of North Carolina; United
Guaranty Credit Insurance Company; United Guaranty Residential
Insurance Company; and Yosemite Insurance Company.
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