State Regulators: We Protect AIG Insurance Assets

The No. 1 job of state insurance regulators is to make sure insurance companies operate on a financially sound basis. If needed, we immediately step in if it appears that an insurer will be unable to fulfill the promises made to its policyholders. This includes taking over the management of an insurer through a conservation or rehabilitation order, the goal being to get the insurer back into a strong solvency position.

State regulators have numerous actions they can take to prevent an insurer from failing. Claims from individual policyholders are given the utmost priority over other creditors in these matters — and, in the unlikely event that assets are not enough to cover these claims, there is still another safety net in place to protect consumers: the state guaranty funds. These funds are in place in all states. If an insurance company becomes unable to pay claims, the guaranty fund will provide coverage, subject to certain limits.

It is a state insurance regulator’s responsibility to protect policyholders and ensure a healthy, competitive market for insurance products. Strict solvency standards and keen financial oversight — based on conservative investment and accounting rules — continue to be the bedrock of state-based insurance regulation.

- Matt Denn, the Delaware commissioner, makes many of the same points that the NAIC makes in its statement.

Denn also points out that most Delaware residents who hold AIG coverage have policies issued by insurers domiciled outside of Delaware, and that is a concern about the many AIG workers in Delaware as well as the many AIG policyholders in Delaware.

“Should there be any requests from AIG involving the Delaware regulated companies, every decision that I make will be for the primary and exclusive purpose of assuring that every policyholder is protected to the fullest extent of the law,” Denn says.

- Myron Kreidler, the Washington state commissioner, says “there is a firewall in place that guards the assets of the insurance companies and protects policyholders.”

“The parent company cannot move assets upstream without the approval of state insurance regulators,” Kreidler says. “If you have a policy through an AIG insurance company — whether it’s an auto policy, homeowner policy or even an annuity — your coverage is safe. Do not cancel your policy or cash in your annuity. State regulators have made sure that the insurance companies have the money necessary to pay claims. And if the financial condition of AIG takes a turn for the worse, we have the authority to prevent AIG from raiding its insurance companies.”