We have seen recent bailouts in the banking and auto industry and AIG received billions in a bailout during 2008. How does this affect your insurance policy?
Because AIG is an extremely large insurance company making the headlines, we began receiving calls. Of course this raised concern with our clients, especially those clients that have life insurance and annuities placed through our office.
We’re writing to assure you as best we can that everything is fine. The AIG bailout had everything to do with the investment operations of that company, not the insurance operations. Insurance regulation is very well-developed and has produced extremely secure results for policy holders over a period of decades.
Although carriers have some investment exposure to risky stocks, that exposure is extremely limited – one carrier’s exposure to Lehman Brothers was only .4% of their investment portfolio, that’s a ratio of .004 to 1. That same carrier has over $11.5 billion in cash. Insurance regulators make sure that companies under their watch retain large cash reserves to prevent problems like the one’s we’re seeing in the banking industry.
You may remain concerned and that’s understandable. If so, please call or e-mail me, if you’re interested in learning more detail about the solvency of your insurance company.