Regulators Join AIG In Defending Company Reinsurance Practices

W. O. Myrick, a retired chief insurance examiner for Louisiana, was quoted in the article, to the effect that "a conglomerate like AIG can 'keep moving assets around to clean up one company' at a time, when examiners were looking."

Only a coordinated, multistate examination of all the insurance companies would catch this, Mr. Myrick said. The article added that AIG has 71 American insurance companies spread throughout 19 states, and those states do not conduct examinations simultaneously.

In a statement, AIG said the Times report "relies on the assertions of a consultant [Thomas D. Gober, a former insurance examiner who now has his own forensic accounting firm] paid to say hostile things about AIG in connection with a lawsuit, and another individual [Mr. Myrick] who admits he has not fully reviewed our books and inappropriately discounts the points made by our regulators who do fully examine our books."

The company maintained that its companies are fully equipped to meet policyholder obligations, are well capitalized, and are "absolutely committed to meeting policyholder obligations and maintaining strong capital levels."

Michael Moriarty, deputy superintendent, property and capital markets at the NYSID, said he did not agree with the way the Times article characterized AIG. He conceded that AIG is a complex entity, but he said he would not equate the complexity with something sinister going on.

He said he was not aware of any asset-moving in order to spruce up an individual company's balance sheet for an examination. All licensed AIG companies are reviewed and analyzed on a quarterly basis, and any material movement of assets would be seen and questioned, said Mr. Moriarty.

Companies can move capital around to shore up an affiliate's capital base, he said, but "that's not a sign of anything sinister."

While AIG does have a lot of companies domiciled in a lot of states, Mr. Moriarty said the states are protective over their domestics. For example, he said American Home Assurance is a New York domestic AIG company. New York regulators, he said, make sure the company complies with the law and has enough assets to cover its liabilities, and other states do the same with their domestics.

Regarding AIG companies reinsuring each other, Mr. Moriarty said accounting rules are in place to guard against anything nefarious. He said if a New York-based AIG company gets reinsurance from an AIG company not licensed in New York–and the NYSID therefore does not get the financial statements of the reinsurer–that reinsurer would be required to post 100 percent collateral.

"This is not a Ponzi scheme type of thing," Mr. Moriarty stated.

Joseph Fritsch, New York Insurance Department director of accounting policy, added that multiple states do coordinate and conduct joint exams every three-to-five years.

Acting New York Superintendent Kermitt Brooks, who is chair of the National Association of Insurance Commissioners AIG Managing Task Force, wrote a letter to the editor of the Times criticizing the article.

"During this extremely critical time, it is vital that important voices in the public discourse such as The New York Times act and speak responsibly with the full recognition that making inappropriate assertions based on incomplete information ultimately hurts both policyholders and taxpayers," he said.

Therese M. Vaughan, chief executive officer of the NAIC, said in a statement, "Consumer protection is our first and foremost concern. The 71 state-regulated insurance entities within AIG are financially sound and are fully able to pay claims."

Rating agencies Moody's and Standard & Poor's said no action has been taken on AIG as a result of the Times story. A Moody's representative said he cannot comment on possible future rating actions.