What happens if AIG go bust?

slumped

Hi All

I have 2 personal policies and my business is insured with AIG Ireland Ltd.

What happens if AIG in the USA goes bankrupt?

Are AIG Ireland bonded or will I lose my policies?

Tried the Fin Reg this morning but nobdy was able to answer the query!

S

Little Miss Cutie

Hi

I have just been on the phone to my broker for car insurance and they say they have spoken to AIG who say they aren't going bust.

They also told me that they have 7 other underwriters that they use and my policy will be immediately transferred to one of them if AIG go bust.

I hope this helps.

Biggins

Get a copy of todays Irish Mail. It goes into the AIG extensively (page 7) and explains a lot.
It might be just the paper scaremongering but they say AIG are not safe at all.

gobby

Biggins wrote: »

... they say AIG are not safe at all.

Thats not good. My uncle works for them! :eek:

Little Miss Cutie

http://www.dailymail.co.uk/news/article-1056283/Manchester-United-sponsor-AIG-granted-20bn-shore-finances.html

This is a story from the UK Mail, think it might be similar to what was said in the Irish Mail.

Hate to say it but as an accountant it looks like a very dodge situation, not sure they can keep afloat

Biggins

If indeed things are looking shaky, there will probably be drastic cutbacks at the very least coming.
The Irish mail gives an insides view on the situation with the AIG and explains a good deal also how it can effect us here.

Read here too: http://abcnews.go.com/Business/MarketTalk/story?id=5809764&page=1

jor el

You should take anything you read in the Mail with more than a pinch of salt. They're a paper that are renowned for over-hyping scare stories.

The same should apply from anything you hear from AIG themselves. They're hardly going to admit to their customers that they're going down the swanny, and that you should move all your policies.

My car insurance is with AIG, and I'm not doing anything unless something actually happens, and not just speculation on it happening.

Biggins

jor el wrote: »

You should take anything you read in the Mail with more than a pinch of salt. They're a paper that are renowned for over-hyping scare stories.

The same should apply from anything you hear from AIG themselves. They're hardly going to admit to their customers that they're going down the swanny, and that you should move all your policies.

True in both cases however this one time there might be some serious truth in the AIG story, for example see the ABC news link above and the Irish Times today to name a few other Irish and non-Irish sources.

Cabaal

jor el wrote: »

You should take anything you read in the Mail with more than a pinch of salt. They're a paper that are renowned for over-hyping scare stories.
.

here, here!
The Mail is a rag

Biggins

I think if it was me, I'd hope for the best, stick with them but if my contract term was up with them soon, I'd seriously consider moving to another crowd.
..but that's easy to say, and probably harder to do sadly.

Nody

The current Wallstreet rumour is that if they don't get the money they where told they'd be allowed to pull out of subsidaries today they will file for Chapter 11 tomorrow. Since you're not going to be able to change anything in that time frame all you will really be able to do is lean back and wait.

The thing is even if they file a Chapter 11 they may end up selling part of their business to another company and hence you'd still be safe (but with a different company and possibly different terms).

IvyTheTerrible

I also have AIG car insurance, and I'm not going to speculate about what will happen to them. However, I do have a hypothetical question. Suppose they do go bust, would my broker automatically switch me over to another provider, and as AIG was the cheapest quote, would I have to pay the difference with the new provider?

Biggins

I'm not an expert but I think you would have to start afresh with a new company. A broker at your new request would have to sign you up to another. They are not under obligation that I know of, to automatically get you into another scheme.

The above might be confirmed or cleared up by someone else here.

jor el

IvyTheTerrible wrote: »

I also have AIG car insurance, and I'm not going to speculate about what will happen to them. However, I do have a hypothetical question. Suppose they do go bust, would my broker automatically switch me over to another provider, and as AIG was the cheapest quote, would I have to pay the difference with the new provider?

I'd imagine that if AIG file for Chapter 11, then anyone with them will have to arrange alternative cover, and pay the difference. I'd be hoping you wouldn't have to pay the whole amount to the new company, since the money already paid to AIG will be gone with them, but the new insurer will want the full amount.

There is some protection in place for people when financial institutes go under, but I'm not sure how this effects (if at all) the insurance companies, and premiums paid to them.

Tomorrow's news headlines will be interesting...

January

Cutie_pc wrote: »

Hi

I have just been on the phone to my broker for car insurance and they say they have spoken to AIG who say they aren't going bust.

They also told me that they have 7 other underwriters that they use and my policy will be immediately transferred to one of them if AIG go bust.

I hope this helps.

Sounds like I was speaking to you on the phone this morning....

Run_to_da_hills

In July 2001 the Independent Insurance who were the underwriters for Carle Nash motorcycle insurance went bust. About 1/3 rd the countries bikers drove around the country technically uninsured for several months as their certificate was not worth the paper it was printed on.

The Government at the time did absolutely FA about it and many bikers were so pis*ed off at paying the high initial premium that they chanced riding out their debunked policies to the end, including myself. The cops seemingly kept a blind eye to it and accepted these "certs" as valid until they expired. I could see the very same thing happening again. http://www.independent-insurance.co.uk/

EKRIUQ

Also how will this effect Man United? AIG sponsor them!

Guy:Incognito

Run_to_da_hills wrote: »

The Government at the time did absolutely FA about it and many bikers were so pis*ed off at paying the high initial premium that they chanced riding out their debunked policies to the end, including myself. The cops seemingly kept a blind eye to it and accepted these "certs" as valid until they expired. I could see the very same thing happening again. http://www.independent-insurance.co.uk/

The cops turnign a blind eye will do you little good if you end up crippled and oweing a couple of hundred grand to someone you hit.

Biggins

Namesco wrote: »

Also how will this effect Man United? AIG sponsor them!

Somehow I think the team won't go hungry!

Run_to_da_hills

Stekelly wrote: »

The cops turnign a blind eye will do you little good if you end up crippled and oweing a couple of hundred grand to someone you hit.

The argument for a lot of bikers at the time was that the Government did FA about it, had it being a major car insurance company like the former PMPA in the 70ies they would have had to do something about it. This incident was at the time shortly after the Norwich Union had the monopoly and policies were quite high. Many bikers just took the chance and drove "uninsured" until their "policies" expired. Many classic car owners were hit by the same incident.

irishbird30

Independent Insurance in the UK went spectacularly bust in 2001 as a result of £700m fraud!! In that case Royal and Sun Alliance bought out the policies of the exisiting policyholders - in other words they accepted the risk underwritten by Independent and customers then renewed their insurance with RSA. Hopefully the same would happen here (also an AIG customer). Of greater concern should be the question of how pending claims will be met by the insurers - if there is no money in the pot then there will be a long ad lengthy battle to get compensation - although there should be policyholder protection in place to cover this. And to bore you even further I think most large insurers have reinsurance policies with even larger companies.

caesar

I'm not trying to scaremonger here but I'm amazed that after doing a search that there are only two threads on this. This is very serious. There are so many threads on here about the Lisbon treaty and what not but this is a far bigger. I don't think people have grasped how serious this is.

AIG provide about 70% of the worlds insurance cover. Their credit rating has taken a big hit in the past few day, they used to have a AAA rating, the best in the industry afaik. They need to get $75bn(£42bn) in the next day or two to survive this. If they go under there will be serious consequences for the world Insurance market. Their own competitors don't even want to see them go bust.

Even if they ride this out, there will inevitable be job cuts along the line. Its not really a case of if there will be job cuts but more of a case of how many really. Thats to be expected I guess.

Some people think they will be bailed out by the US government but this is unlikely. All this turmoil in the market has been caused by the aggressive drive for more business on the ground in these companies. Some of the practices were overlooked because business was booming.....but one blimp and it has come tumbling down. Obviously it's not as simple as that but you get the idea. There is a need for market correction and the US government know this. Simply, they cant bail every major institution out even if the world financial market is going into turmoil. In a way all of this may be necessary to get the world back on track.

I am not an expert, I haven't read any of the mentioned papers. I'm just going on what I know from people in the industry and from my own knowledge of the industry.

As for the people who hold policies with them - well wait and see what happens in the coming days.

Bottom line, if AIG go under, there will be more news like this to follow.

And before people ask, I don't work for AIG.

jimmycrackcorm

Saved by the fed for a measily £43Billion.

Guy:Incognito

caesar wrote: »

Their credit rating has taken a big hit in the past few day, they used to have a AAA rating, the best in the industry afaik.

Rabbo have a AAA rating too if Sean Moncrief is to be believed.:)

Biggins

jimmycrackcorm wrote: »

Saved by the fed for a measily £43Billion.

Good to hear.

Its makes me wonder though. How more many times can the American government go on doing this?
What's the count now, 2 or 3 in the last week alone?

jor el

Haven't the Fed got a share in AIG now though? So not a bail out or loan, but a buy in.

If what caesar says is true, and AIG are providing about 70% of the world's insurance cover, then they're probably too big to let go under.

Biggins

Sadly there are no safe bets any more.
If two of the top five Broker firms in the world can go belly-up within 7 days of each other, its yet again a clear sign that nothing is safe totally, any more.

MCMLXXXIII

caesar wrote: »

Some people think they will be bailed out by the US government but this is unlikely.

That's the problem.
It happened to be true, the US Govt bailed AIG out - but it's because everyone expected it.
They expect it because it would have a huge negative impact on the world economy, and especially in the US.
These companies didn't get so big playing nice with each other and their competition. Stocks rise and fall based on customer perception. When these large banks buy out other banks they look good, so their stock value increases. If they lose money - or don't make as much as expected - their stock value goes down...and it's much harder to turn a falling stock around than it is to change a rising stock.
Besides that, with people owing money on houses (and cars, and student loans, and credit cards, etc.) it is accepted that a company owes money as well. The high-risk high-payout investments are encouraged from these large companies.

Here's the killer: The US has bailed out companies before, and they've been doing it for a long time...but before it was not this big and never this often. It is in the US's best interest to bail out these companies for their own sake, but now it's expected. The large companies know that the US can't lose another few trillion dollars of the economy and it's worth it to spend $80B to keep $1.1T afloat.
So, what's the worst that can happen if your company loses big? The government will give you free money and who cares if they own 80%. It was a publicly traded company anyway so it's not like any specific owners "lost" big on the deal.
Now the US just has a larger and more powerful version of Fannie Mae and Freddie Mac under its control that will hopefully turn over a profit in the years to come.

Think about it - the US just bought over 800 billion dollars in assets for a mere $80 billion - 10 cents on the dollar isn't a bad deal.

The only thing that gets me - as capatalistic as the US claims to be, while fighting over nationalized health care, privatising schools, etc., does the US really plan on having government regulated and run banks?

matt cork

just to add my tupence worth as i have had to follow this issue quite closely this week.

the €85bn loan will allow time to sell off their assets as opposed to a fire sale. the most profitable part of AIG is their general insurance arm, which equates to roughly 50% of their revenue ($110bn). to pay the loan, plus the interest (circa. £18bn pa) and recoup their losses currently at $19bn for the third quarter, they would have to concentrate on selling the most profitable part of their business - the general insurance element

the credit insurance arm isn't worth the paper it written on and the sale of this part of the business along with their bonds (currently 50c per $1) wouldn't generate enough income to cover any of the loan, interest or losses

imho the fed loan is effectively going to provide AIG enough time to liquidate the company in a controlled manner

it will be interesting over the next few weeks what moodys and s&p do in relation to their security rating. any further reduction, less than an A-rating, will see alot of business removed from their portfolio as most brokers and clients would require a higher security (the gerling suffered simiarly in 2004 to 2005 with their bbb rating which brokers would not support)

certainly going to be an interesting couple of months waiting for end of year financial figures