Philadelphia Injury Attorney Blog

On September 15, 2008, the beleaguered insurance company, American International Insurance Group, one of the nation’s and world’s largest insurers is struggling for survival. I received an email and call from an agent at one of the nation’s largest insurance brokers telling me that many clients are “in a panic” and asking me for my “take” on this situation. According to sources, AIG is getting help from the Insurance Commissioners of New Jersey, New York and Pennsylvania, as well as the Federal Government, in raising cash while swapping its subsidiaries liquid assets for those that are difficult to convert into cash by the parent company. As an experienced insurance claims attorney for almost 30 years, let me share my thoughts and attempt to calm your fears. (www.reiffandbily.com).

If you have a policy with AIG Insurance Company, “they are solvent and have the ability to pay claims”, said Sandy Praeger, President of the National Association of Insurance Commissioners in a press release on September 16, 2008. “Our job is to ensure they continue to have the ability to pay”. The New York State and Pennsylvania Insurance Departments are working with AIG to review transactions involving turning illiquid assets into liquid ones. Praeger stated “State insurance regulators will only approve this type of action if there are assured that it is part of a total resolution of liquidity at the parent company and fairly compensates its insurance company subsidies”. AIG’s New York and Pennsylvania companies have approximately $120 billion dollars in total assets, about half of which is Class 1 bonds. The regulators must issue that any assets being exchanged or at least of equal quality or the financial strength of the insurers will be negatively affected. The Pennsylvania Insurance Commission is closely moderating the fate of AIG and its impact on the citizens in the Commonwealth of Pennsylvania. According to an Associated Press story on September 17, 2008, the United States Government will infuse taxpayer funds into the company, granting the U.S. Government an 80% stake in the giant insurer and the right to remove senior management. According to sources, the AIG affiliated automobile insurance companies remain on solid footing. The auto insurance unit is well capitalized. Roger Schmelzer, President of the National Conference of Insurance Guarantee Funds in Indianapolis states “that the holding company is at issue right now”. The holding company could go bankrupt and for policyholders it would just be business as usual. We emphasize that AIG insured’s should not panic. The Commonwealth of Pennsylvania has a Guarantee Association in place to protect policyholders in the event of an insurance company failure. Insurance industry analysts and government officials advise that there is little for policyholders to worry about. There are safeguards in place, similar to FDIC insurance that backs up bank deposits. AIG has 11 insurance units in Pennsylvania regulated carefully by the state.