Officials in Kentucy and Wisconsin are reminding agents and brokers in their states to remember state laws when responding to the current turmoil at American International Group Inc.

The regulators are sending the notices in response to questions about what producers can and cannot do when helping clients respond to news of the problems at the parent-company level at AIG, New York.

Some regulators, such as Mary Jo Hudson, the Ohio insurance director, have indicated that they waged a fierce battle to keep AIG insurance subsidiary assets from being used to help AIG’s non-insurance subsidiaries cope with demands for cash.

Kentucky Insurance Commissioner Sharon Clark writes in a notice aimed at all agents that the Kentucky department has been assured that “the insurance subsidiaries of AIG are solvent and able to pay claims.”

“As the AIG story has unfolded, we have begun receiving reports of agents who are using this as an opportunity to contact AIG insureds with offers to replace coverage,” Clark writes in the Kentucky notice. “We also have received calls from consumers who have been advised to take actions clearly not in their best interests.”

One Kentucky statute, dealing with “defamation,” and a second statute, dealing with a ban on “twisting,” or unnecessary replacement life insurance policies and annuities, could apply to this situation, Clark writes.

“We take allegations of twisting or defamation very seriously and will not hesitate to take appropriate action against agents in violation of those two statutes,” Clark writes.

HYPERLINK “http://doi.ppr.ky.gov/kentucky/Documents/Agent/aigfinal.doc”A copy of the Kentucky agent notice is available here

The Wisconsin Office of the Commissioner of Insurance has issued a bulletin addressed to all life and annuity insurers and intermediaries.

The subject line of the Wisconsin bulletin is “AIG Life and Annuity Insurers.”

“AIG insurance subsidiaries are protected by, and continue to report compliance with, state insurance solvency regulations,” Wisconsin Insurance Commissioner Sean Dilweg writes in the Wisconsin bulletin. “The AIG insurance subsidiaries, including life and annuity insurers, continue to function as viable insurance operations. You are reminded that you are legally obligated to ensure that AIG Life and Annuity policyholders are not subject to misleading, or unsuitable, replacement solicitations.”

Annuity insurers must keep agents from making such solicitations, Dilweg writes.

“Annuity insurers are fully aware of the current market environment and the danger of fear-induced sales,” Dilweg writes. “Annuity insurers have an obligation to immediately take proactive steps to prevent improper solicitations.”

Agencies also have to restrain their agents, and agents who recommend replacements must be prepared to document that any AIG life or annuity policy replacement recommendation is suitable and based on proper representations of the AIG insurer’s status, Dilweg writes.

“Any strategy to replace life and annuity products of AIG insurers primarily on the basis that they are AIG products will be viewed as an unsuitable replacement,” Dilweg writes.

HYPERLINK “http://oci.wi.gov/bulletin/0908aig.htm”A copy of the Wisconsin replacement bulletin is available here.

“Don’t worry and don’t make any rash decisions if you have a policy issued by an AIG insurance company,” Dinallo tells consumers in the news release. “All your covered claims will be paid and all your annuity checks will come. Making sure insurance companies are solvent and able to pay every valid claim is my number one job, and the AIG insurance companies are strong and solvent. If you have a life insurance or annuity policy and someone tells you to replace it because of the troubles at AIG’s parent company, call the Insurance Department immediately.”