What does the AIG meltdown mean for life insurance policyholders?
News of the global insurer AIG’s financial meltdown was hard to ignore. Once the Federal Reserve provided an $85 billion loan package, AIG avoided bankruptcy in the short term. In exchange, AIG must pay a high interest rate on the loan (over 11%), agree to oust its CEO and give warrants that equal 80% ownership to the US federal government. The capital and liquidity crunch faced by AIG resulted in from it’s exposure to bad mortgage debt by the parent AIG holding company. Repercussions for Policyholders You may own a life insurance policy from AIG or one of its subsidiaries (American General or US Life of NY). These companies?capital and reserves are heavily regulated by state law. Each entity is responsible for its own liabilities. Therefore, policyholders are less exposed to the financial turmoil of the parent AIG holding company. What are the experts saying? To relieve policyholder anxiety, American General released the statement: American General Life is well capitalized to meet or
