WASHINGTON–The nation's insurance commissioners meeting here asserted that state regulation has ensured the solvency of carriers including insurance subsidiaries of financially challenged American International Group conglomerate.
Their comments to that effect were delivered throughout the fall meeting of the National Association of Insurance Commissioners, a week after the federal government stepped in with $85 billion of liquidity to keep the AIG holding company in business.
Eric Dinallo, New York's insurance superintendent and one of the regulators involved in negotiations that led to the Treasury Department AIG agreement, emphasized that the problem was with credit default swaps and the way federal regulators oversaw the holding company, not with the way that insurance regulators oversaw insurers. Mr. Dinallo emphasized that the insurance units are solvent.
Joel Ario, Pennsylvania insurance commissioner and vice chair of a new NAIC group charged with handling the AIG issue, expressed disappointment that proponents of an optional federal charter for insurance companies chose AIG to make a case for an OFC.
The insurance units of AIG are its "crown jewels" and the reason that federal regulators had the confidence to bail the company out, according to Mr. Ario. He said that some of the insurance units would be up for sale but that he hoped "a leaner AIG built around core insurance competencies would remain." Most likely, the insurance units would be purchased by other "top-tier insurance companies," he said.
Mr. Dinallo added that if the insurance assets are sold for a profit, then the profits may be used to pay off the loan, but the core assets of the company would not be used. Core insurance assets cannot be invaded by the holding company, he said.
Tom Sullivan, Connecticut's insurance commissioner, said that he does not see any extraordinary dividends being paid out.
New York's Mr. Dinallo said in the neighborhood of 10 percent of AIG's credit default swaps are insurance products. The state announced this week that on Jan. 1, 2009, new tight regulation of those transactions would go into effect.
Mr. Dinallo also said that state insurance regulators do not have data yet on whether the number of surrenders and contract cancellations of AIG insurance products have increased following the announcement of federal intervention.
But insurance commissioners including Sandy Praeger, NAIC president and Kansas insurance commissioner, Mr. Dinallo and Mr. Ario warned that insurance commissioners would not tolerate producers who deliberately provided misinformation about AIG insurance subsidiaries to move customers' business to another carrier.
They distinguished legitimate movement of business from disinformation about AIG's strength just to move business.
Toward that end, the NAIC's Life & Annuities "A" Committee adopted a template to warn consumers to be aware of surrender charges that might be incurred for leaving what they say are solvent insurance subsidiaries and a warning to producers that use of disparaging information without a factual basis is a crime that will be pursued by state insurance departments. To date, states including Kansas, New York, Pennsylvania and Wisconsin have sent out such notices.
AIG has raised the concerns of many insurance consumers. Mr. Dinallo said that in the first two days following the AIG crisis, his department received over 1,000 calls concerning AIG contracts.
His department has sent out 308 forms to insurance companies requesting information on their securities lending programs to see if any are exposed to the sort of financial problems that have dogged AIG.
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