In the face of continuing media and consumer confusion regarding
American International Group, Inc. (AIG) and the role of state insurance
regulators, the National Association of Insurance Commissioners (NAIC) has moved to correct the misinformation and in a published statement urges
caution and a close examination of the facts.
The following news release was published by the NAIC on March 19, 2009 (underlines for emphasis)
“In uncertain times, making correctly informed financial decisions is more
important than ever,” said NAIC Chief Executive Therese M. (Terri) Vaughan,
Ph.D. “This is especially true for AIG’s policyholders, where unsubstantiated
information and misstatements in the media have led to unnecessary consumer
frustration and fear.”
First and foremost, AIG is typically described as the world’s largest
insurance company. In fact, it is a global financial services conglomerate that
does business in 130 countries. AIG owns 176 other companies, in addition to
71 U.S. state-regulated insurance subsidiaries.
“State insurance regulators have been actively involved in the AIG situation
to help ensure that consumers remain protected,” Dr. Vaughan said. “Regardless
of the failings at AIG’s holding-company level, its insurance subsidiaries have
continued to fulfill their obligations to policyholders.”
These points were further underscored in testimony this week by Pennsylvania
Insurance Commissioner Joel Ario at a Congressional hearing before the U.S.
House Financial Services Subcommittee on Capital Markets, Insurance and
Government Sponsored Enterprises.
“AIG’s insurance companies remain strong, in part because state regulation
continues to wall them off from the high-risk activities engaged in by AIG
Financial Products,” Ario said. “The insurance industry — just like the rest of
the global economy — is facing challenges, but this only reinforces the need to
be wary of changing a part of our regulatory system that has proven
effective.”
Ario reiterated that AIG’s Financial Products operation — not its 71 U.S.
insurance subsidiaries — created the systemic risk that caused the federal
government to intercede. Additional action at the federal level, Ario stressed,
should be collaborative, transparent and inclusive — and should integrate
state-based insurance regulation into the framework for managing systemic
risk.
“State insurance regulators recognize that federal action is needed to
address systemic risk within the nation’s financial marketplace,” Ario said.
“This shared objective calls for a collaborative approach .... that does not
compromise one company within the enterprise for the benefit of another.”
Ario also addressed claims made by some of AIG’s competitors that the company
was using federal assistance as an unfair competitive advantage.
“Regulators have devoted special attention to the current allegations,
because AIG and its competitors may have distorted incentives to put their
competitive engines into overdrive,” Ario said. “With the caveat that these
issues are complex, we have not seen any clear evidence of under-pricing to
date, though we continue to look at individual cases and at aggregate numbers on
both renewals and new business at AIG
NAIC's AIG Consumer FAQ
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