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Insurance commissioners in Minnesota and around the country moved Tuesday to assure clients of tottering American International Group (AIG) that its insurance subsidiaries are solvent and warned the parent company not to move cash or other assets in an effort to prop up the troubled parts of its business.
AIG is one of the world's largest underwriters of life, property-casualty and other lines of insurance for business and individuals. And those businesses, supervised by state insurance companies, are considered strong enough to meet their obligations.
However, the New York-based company also is one of the world's largest insurers of financial institutions and the mortgage-backed products that have spelled trouble for the likes of Merrill Lynch, Lehman Brothers and Bear Stearns.
AIG, whose shares have fallen from $59 in January to under $4 this week, has turned to the government regulators for help, so far to no avail. Negotiations also are underway with Wall Street bankers who are trying to help AIG raise capital.
The Minnesota Commerce Department said it has received about 20 calls about AIG's health; other states gave similar reports.
"If you have a policy with an AIG insurance company, they are solvent and have the capability to pay claims," said Kansas Insurance Commissioner Sandy Praeger, who is also president of the National Association of Insurance Commissioners. Praeger continued in a prepared statement:
"AIG's insurance subsidiaries are being asked to provide liquid assets to the financially distressed non-insurance parent company in exchange for non-liquid assets. The New York State and Pennsylvania Insurance Departments are working with AIG to review the transaction. State insurance regulators will only approve this type of action if they are assured it is part of a total resolution of the liquidity issue at the parent company and fairly compensates its insurance company subsidiaries.
"As a holding company, AIG is a separate, federally regulated legal entity that is distinct from its subsidiary insurers. State insurance regulators are committed to protecting the interest of policyholders and will work closely with AIG management and other regulators to fulfill this commitment."
The NAIC said claims from individual policyholders have the "utmost priority over other creditors" and states also have industry-funded guaranty funds up to certain limits in the event that assets are insufficient to cover claims.
Neal St. Anthony • 612-673-7144 • email@example.com