State insurance regulators said Wednesday they are continuing to look into the potential impact in Florida from the financial crisis at insurance giant American International Group (AIG) even as they sought to soothe nervous customers.
"We have been told that the insurance companies are solvent and will be able to pay claims," Insurance Commissioner Kevin McCarty said in a statement. "It is important that policyholders continue to pay their premiums to ensure that their coverage does not lapse."
Most of the corporation’s liquidity problems are in its massive holding companies and do not extend to insurance subsidiaries, McCarty said.
AIG has 46 subsidiaries that operate in Florida, including 34 that sell property and casualty insurance and 12 that sell life and health insurance, according to the Office of Insurance Regulation. Only one AIG affiliated company, American General Property Insurance Co., is headquartered in Florida.
McCarty’s office was told the primary financial problem is with AIG’s holding companies, not its insurance companies, and that the $85 billion loan from the federal government will help resolve it.
Even if the news were bad, McCarty pointed out that there are backups for insurance companies that get into financial trouble, including the Florida Insurance Guarantee Association.
FIGA is only one of several industry-based safety nets that have the ability to raise funds from policyholders of the more than 2,500 companies doing business in Florida, said spokeswoman Michelle Newell Lovern.
Still, consumer advocates called for prompt action from regulators to protect consumers.
"State insurance regulators must act quickly to ensure that AIG does not raise premiums on drivers and homeowners to make up for the losses from its foray into the world of subprime mortgages," said Carmen Barber, a spokeswoman for California-based Consumer Watchdog.
AIG and its subsidiaries have a 9 percent share of Florida’s annuity market, and a 5.2 percent share of Florida’s life insurance market, as of December. In addition, AIG companies have a 3.2 percent share of Florida’s auto insurance market, and a 0.3 percent share of Florida’s homeowners insurance market, according to data from McCarty’s office.
OIR spokesman Ed Domansky said the department doesn’t have enough information to estimate how many policyholders that represents.
"I assure you that, if it should become necessary, we will immediately intervene if we feel that any one of the AIG companies operating in Florida will be unable to pay its claims and fulfill the promises made to its policyholders," McCarty said.
Representatives for AIG in New York did not return phone calls seeking comment.
Sam Miller, a spokesman for the Florida Insurance Council, which represents the industry, said Florida law restricts the reasons for which insurance companies can seek increased premiums for homeowners and auto insurance.
Miller said that insurers must show projected losses from their business in Florida in order to obtain rate increases.
"You can’t raise your rates to make up for past losses," Miller said.
However, he said the state does not regulate life insurance premiums, although such premiums are set in contracts with policyholders.
AIG shares closed Wednesday at $2.03 a share, down $1.71, or 46 percent. AIG stock has traded as high as $70.13 a share in the past year.
Contact Blake at 242-3644 or [email protected]