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If AIG Crashed, Would Rest Of Insurance Market Fail?

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AIG Crash Effect on Insurance Market

If AIG  crashed would it result in insurance market failure? An interesting article was published recently in P&C – National Underwriter.  It was a shocker.

Graphic Of Computer Insurance Market Infographic
StockUnlimited

The American Insurance Association and Property Casualty Insurers Association of America (PCI) argued their point to Congress.   Their conclusion was if AIG’s property and casualty operations failed, there will be little effect on the property and casualty (P&C)  markets as a whole.  The P&C markets did not suffer the same systemic problems as the other financial markets.  As I had posted previously, it is the financial part of AIG that had failed and started the AIG meltdown.  The P&C part of AIG was never in trouble.

AIG in its justification for additional aid argued that “AIG continues to pose a systemic risk” and requires immediate additional federal assistance; otherwise its failure would cause “multiple and potentially catastrophic unforeseen consequences.”

The presentations to the leadership of financial services congressional committees were made in response to a document provided to the Treasury Department and Federal Reserve Board by AIG to justify an infusion of additional funds to the company as it reported a $61.7 billion loss.

Department Of The Treasury Insurance Market Badge if AIG Crashed
123RF

The conclusion of the article was that the life insurance operations part of AIG would cause quite a ripple in the life insurance market, but not the P&C markets.  There are enough capacity and market forces that would be able to absorb the failure of AIG as when other P&C companies have failed in the past.

Could there be more AIG’s in the P&C and workers compensation markets?  I do not think so, as there was never a failing P&C part of AIG.   The life insurance part of AIG is not considered in the analysis of their P&C operations.

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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