AIG Plans To Be First When Peace Arrives In Iraq

AIG, he said, is "excited" by the fact that a member of the National Association of Insurance Commissioners is headed for Baghdad to work on establishing an insurance regulatory framework for the country. Mr. Knight said the NAIC representative–Arkansas Insurance Commissioner Mike Pickens, who has worked on arrangements to provide insurance expertise for China and Vietnam–sent AIG a note saying he was going to Baghdad to draft insurance regulations for Iraq.

Mr. Pickens' office referred questions to Michael J. Carr, who lists himself as an insurance sector specialist with the Iraq Economic Recovery, Reform and Sustained Growth project. Mr. Carr said by e-mail that "at this stage it is not appropriate for an interview to take place."

According to an Associated Press report, Mr. Carr–a British reinsurance expert–has been drafting an Iraq insurance code with Mr. Pickens modeled on Jordanian law.

Mr. Knight said he understood that under the regime of ousted dictator Saddam Hussein there had been a fairly healthy insurance industry.

AIG currently is in Iraq providing coverage for contractors under the Defense Base Act–a program akin to workers' compensation. The company, he noted, has been providing such protection since 1941, when the act was promulgated to protect workers on projects in Japan. More recently it has sold the coverage in Vietnam, Somalia and Afghanistan.

Mr. Knight said the DBA line is profitable, but in Iraq there have been "lots and lots of claims, ranging from slip and falls, to deaths and loss of legs and arms from exploding mines."

Besides DBA, which Mr. Knight called "super-enhanced comp," AIG is providing life and health, kidnap and ransom coverage, as well as medical evacuation services. AIG sees competition from CNA, ACE and Lloyd's syndicates.

Explaining the difficulties in underwriting DBA coverage, Mr. Knight noted that it would be hard to insure many of the contracting jobs even in a non-war situation, "and then you add sandstorms and mines and people shooting at you–lots of hazards." Policy periods generally follow the length of a concern's contract.

Mr. Knight said that premiums for contractors vary according to when and where the coverage is taken out, explaining, "we're trying to calibrate the rates on a week-to-week basis," and noting "the Sunni triangle and other areas are more unstable."

"We think we're placing smart bets, but it's not an easy underwriting task," he said?adding, however, that writing insurance in a volatile environment is "what AIG's good at."

The company is handling its Iraq business out of facilities it has in Dubai, United Arab Emirates; Kuwait City; Riyadh, Saudi Arabia; and Istanbul, Turkey. By the end of the year, Mr. Knight said the company expects to have a half-dozen personnel located in Iraq.