Other multiline insurers likely to teeter on brink of bankruptcy: survey finds

American International Group (AIG) will not be the only major, multi-line insurance group to experience trouble as a result of market dislocation, A.M. Best survey respondents predict.
A.M. Best surveyed more than 550 insurance industry professionals via email. Seventy-two per cent of survey respondents believe other major multi-line insurance groups could be brought to the brink of bankruptcy, much like the crisis faced by American International Group Inc. (AIG), reports A.M. Best’s BestWeek.
When asked if the US$85-billion credit facility to stabilize AIG (which has since been supplemented by a US$38 billion liquidity facility) was the right thing to do, only 51% of the respondents said ‘Yes.’
Thirty per cent of respondents said ‘No’ and 18.6% were unsure.
“In terms of the oversight that was being provided, roughly 61% fingered the U.S. Securities and Exchange Commission as most culpable for not recognizing the problems at AIG earlier, while about one quarter of respondents blamed state insurance regulators,” BestWeek reports.
Survey respondents also predicted diminished investment yields for the industry across the board and a slowdown in business in both commercial and personal lines as a lack of credit reverberates throughout the broader economy.
“I expect some customers to go out of business or downsize and they will not be replaced by new businesses due to the lack of credit,” insurance agency owner Michael H. Dubow told A.M. Best. “Also, homeowners will not be trading up to higher-valued homes, which is a source of premium growth Some customers will just not be able to afford to keep up their insurance, both personal and commercial, and audits are almost always coming in as refunds and payrolls and receipts are revised downward for the coming year.”