NAIC CORRECTS MISINFORMATION
Under State Regulatory Authority
WASHINGTON, D.C. (March 19, 2009) - In the face
of continuing media and consumer confusion regarding American
International Group, Inc. (AIG) and the role of state insurance
regulators, the National Association of Insurance Commissioners
(NAIC) urges caution and a close examination of the facts.
"In uncertain times, making correctly informed financial
decisions is more important than ever," said NAIC Chief Executive
Therese M. (Terri) Vaughan, Ph.D. "This is especially true for AIG's
policyholders, where unsubstantiated information and misstatements
in the media have led to unnecessary consumer frustration and
First and foremost, AIG is typically described as the world's
largest insurance company. In fact, it is a global financial
services conglomerate that does business in 130 countries. AIG owns
176 other companies, in addition to 71 U.S. state-regulated
"State insurance regulators have been actively involved in the
AIG situation to help ensure that consumers remain protected," Dr.
Vaughan said. "Regardless of the failings at AIG's
holding-company level, its insurance subsidiaries have continued to
fulfill their obligations to policyholders."
These points were further underscored in testimony this week by
Pennsylvania Insurance Commissioner Joel Ario at a Congressional
hearing before the U.S. House Financial Services Subcommittee on
Capital Markets, Insurance and Government Sponsored
"AIG's insurance companies remain strong, in part because state
regulation continues to wall them off from the high-risk activities
engaged in by AIG Financial Products," Ario said. "The
insurance industry - just like the rest of the global economy - is
facing challenges, but this only reinforces the need to be wary of
changing a part of our regulatory system that has proven
Ario reiterated that AIG's Financial Products operation - not its
71 U.S. insurance subsidiaries - created the systemic risk that
caused the federal government to intercede. Additional action
at the federal level, Ario stressed, should be collaborative,
transparent and inclusive - and should integrate state-based
insurance regulation into the framework for managing systemic
"State insurance regulators recognize that federal action is
needed to address systemic risk within the nation's financial
marketplace," Ario said. "This shared objective calls for a
collaborative approach .... that does not compromise one company
within the enterprise for the benefit of another."
Ario also addressed claims made by some of AIG's competitors that
the company was using federal assistance as an unfair competitive
"Regulators have devoted special attention to the current
allegations, because AIG and its competitors may have distorted
incentives to put their competitive engines into overdrive," Ario
said. "With the caveat that these issues are complex, we have not
seen any clear evidence of under-pricing to date, though we continue
to look at individual cases and at aggregate numbers on both
renewals and new business at AIG."
Click HERE for the full text of Ario's testimony.
Click HERE for more information about the regulatory
response to AIG.