An independent agent group does not foresee a "domino effect" from the AIG situation, while an insurance company association in favor of optional federal charters is calling for more effective regulation to "ensure safety" in the wake of AIG's bailout.

"IIABA does not believe that the AIG situation will have a domino effect on the insurance industry," Robert Rusbuldt, president and chief executive officer of the Independent Insurance Agents and Brokers of America (IIABA), said in a statement regarding the Federal Reserve's announcement of a bridge loan to AIG.

Meanwhile, Marc Racicot, president of the American Insurance Association and former governor of Montana, said AIG's problems show the need to "revisit the regulatory framework of the U.S. financial services sector, and the property-casualty insurance industry in particular."

Mr. Rusbuldt said "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. IIABA has been closely monitoring the developments on AIG and will continue to do so."

Mr. Rusbuldt continued that 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 bailout."

He said AIG's "complex corporate structure" 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," he said, noting that AIG's 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."

Ken Crerar, president of the Council of Insurance Agents and Brokers, also welcomed the Fed's move.

"We applaud efforts to help stabilize financial markets, and particularly AIG's holding company, in order to ensure that going forward, the company's promises to our members' clients are kept and protected," Mr. Crerar said. "AIG has been an important and substantial player in the insurance market, and whatever happens, the first concern of our members is their clients."

AIA's Mr. Racicot said that policymakers need to "look for solutions that avoid the potential for market crises and consider more effective ways of regulating the financial services sector and protecting consumers without compromising the efficiency benefits that free and open markets provide."

He added that for highly-diversified financial services conglomerates operating in multiple regions of the country and globally, "it makes little sense to continue to single out insurance for regulation on a piecemeal basis at the state level. It makes a great deal more sense for a federal regulator to monitor systemic risk and exercise group-wide supervision on a national basis to ensure safety and soundness."

Special Reports /

No 'Domino Effect' From AIG, IIABA Says

Related Stories

Recommended For You