AIG FATE HAS BIG IMPACT ON THIS SIDE OF THE HUDSON

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AIG Fate Has Big Impact on This Side of the Hudson

Posted on: Wednesday, 17 September 2008, 15:00 CDT

By RICHARD NEWMAN, STAFF WRITER

Beleaguered American International Group Inc., the largest U.S. insurer, is also a big player in New Jersey.

The New York-based financial services giant is the top underwriter of commercial lines in New Jersey and ranks eighth in auto insurance based on premium dollars.

"If AIG goes under, that's going to send ripples throughout the New Jersey and New York region," said James Hughes, dean of Rutgers University's Edward J. Bloustein School of Planning and Public Policy.

NOTE: HUDGES IS A WELL RESPECTED PERSONALITY IN THE INSURANCE INDUSTRY.

The federal government announced an $85 billion bailout of AIG on Tuesday night. It is one of the world's biggest financial services players, and a collapse would have had consequences for financial firms around the globe. AIG insures some of the largest assets in the world and does business in more than 100 countries.

More than a dozen AIG subsidiaries are licensed to operate in New Jersey, but the only one with headquarters in this state is auto insurer American International Insurance of New Jersey. By AIG's standards it is a comparatively small operation, covering 76,000 vehicles and generating $80 million in annual premiums.

The auto insurance unit is "well-capitalized," said Ed Rogan, a spokesman for the Department of Banking and Insurance, and AIG's holding company has not requested permission to access that capital. "We would not approve such a thing if in anyway it would impact consumers," Rogan said.

NOTE: ROGAN IS A WELL RESPECTED PERSONALITY IN AUTO INSURANCE INDUSTRY.

An AIG spokesman declined to comment.

An organization of state insurance regulators issued a statement Tuesday to address AIG policyholders' concerns.

"If you have a policy with an AIG insurance company, they are solvent and have the capability to pay claims," Sandy Praeger, president of the National Association of Insurance Commissioners, said in the statement. "Our job is to ensure that they continue to have the ability to pay."

Insurance regulators in New York and Pennsylvania are working with the holding company to give it access to capital in subsidiaries domiciled in those states.

"The holding company is at issue right now," said Roger Schmelzer, president of the National Conference of Insurance Guaranty Funds in Indianapolis. "The holding company could go bankrupt, and for policyholders it would be business as usual."

AIG shares plunged 21 percent Tuesday, to $3.75 a share.

Other insurers could benefit from AIG's woes. Warren-based Chubb Corp. rose $6.53, or 14 percent, to $55.05, and Newark's Prudential Financial Inc. climbed $6.64, or 9.2 percent, to $79.18.

***

American International Group in New Jersey

Market

Line Ranking* Share*

Commercial 1 10%

Automobile 8 4.7%

Homeowner 19 1.3%

*2007

Source: Insurance Information Institute

***

E-mail: newman@northjersey.com

(c) 2008 Record, The; Bergen County, N.J.. Provided by ProQuest LLC. All rights Reserved.

Source: Record, The; Bergen County, N.J.

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