By MARY WILLIAMS WALSH - Published: July 30, 2009
The dozens of insurance companies that make up the American International Group show signs of considerable weakness even after their corporate parent got the biggest bailout in history, a review of state regulatory filings shows.
Over time, the weaknesses could mean trouble for A.I.G.’s policyholders, and they raise difficult questions for regulators, who normally step in when an insurer gets into trouble. State commissioners are supposed to keep insurers from writing new policies if there is any doubt that they can cover their claims. But in A.I.G.’s case, regulators are eager for the insurers to keep writing new business, because they see it as the best hope of paying back taxpayers.
In the months since A.I.G. received its $182 billion rescue from the Treasury and the Federal Reserve, state insurance regulators have said repeatedly that its core insurance operations were sound — that the financial disaster was caused primarily by a small unit that dealt in exotic derivatives.
But state regulatory filings offer a different picture. They show that A.I.G.’s individual insurance companies have been doing an unusual volume of business with each other for many years — investing in each other’s stocks; borrowing from each other’s investment portfolios; and guaranteeing each other’s insurance policies, even when they have lacked the means to make good. Insurance examiners working for the states have occasionally flagged these activities, to little effect.
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http://www.nytimes.com/2009/07/31/business/31aig.html?th&emc=th
What AIG may have been doing is using transactions between its subsidiaries to make it appear that each subsidiary subject to individual state regulation is sound. But the dozens of subsidiaries, analysed together, may not actually have the collective assets to make good on their collective policies.
AIG may be another Ponzi scheme which can't survive unless it can sell more insurance to new customers in order to get more premiums to pay off existing customers, etc, etc, ...