AIG Life local advantage at risk

Mark Kachor

The possible collapse of AIG Life’s US parent company could jeopardise the local operation’s leading position, with the possibility of a ratings downgrade which could bring the company in line with its competitors.

According to the managing director of research house Dexx&r, Mark Kachor, AIG Life holds one of the highest Standard & Poor’s ratings of all the local insurers, however this advantage is now under threat.

“One of the reasons it has that rating is because its parent company guarantees it will meet the Australian company’s liabilities if it ever needed to, so the issue now is whether that guarantee is as strong as it was in the past,” he said.

Kachor believes a ratings downgrade would bring AIG Life back into line with other insurers.

“AIG has enjoyed that rating superiority for some time in the market and it has been one of the items that the company has stressed places them on a very strong financial footing as a life company — but it is only relative.”

However, in a statement on its website, AIG Life has moved to reassure its customers that despite the offshore challenges, the local company has sufficient capital and reserves to meet it obligations to policyholders.

“I want to assure customers and business partners that AIG Life in Australia operates as a completely separate legal entity within the stringent Australian regulatory regime,” the company’s managing director, Stuart Harrison, said.

“We continue to comply with regulations concerning capital adequacy and solvency.”

AIG Life’s parent company, American International Group, is teetering on collapse as it struggles to raise as much as US$75 billion to maintain solvency.

Ratings houses in the US have moved to downgrade the insurance giant’s debt ratings