What Happens if AIG Goes Bankrupt?
Attorney
(866) 735-1102 Ext 480
This is a fairly common question I receive as an attorney, particularly from my worker’s compensation clients. These injured workers’ employers’ insurance is through AIG and, consequently, they receive their weekly checks and, ultimately settlement money from AIG. So, what happens if AIG blows through the bailout money on expensive retreats and poor executive decisions. First of all, let me make it clear President Obama’s idea of transparency and accountability within the government itself and related to government assistance to private entities make it much more likely AIG is successful in the future.
However, what happens if AIG fails? Honestly, insureds have relatively little to worry about. Similar to FDIC insurance for bank deposits, significant regulation and state guarantee funds protect insureds to a fairly large extent.
It is simply not as well known to the average person. The FDIC is well known because the federal government has made it well known to protect against a banking collapse like the one during the Great Depression. Essentially, state and federal regulations will assure that AIG subsidiaries are solvent and able to pay claims. Additionally, AIG’s subsidiary assets would be sold and state guarantee funds that assist in claims pay outs would kick in, if necessary.
On a side note, the real threat to the AIG insureds is the potential of losing coverage at the renewal period if AIG did become insolvent and left the market. In that sceanrio, the more risky the type of coverage, the more difficult it would be to find another insurer. Even in the worst cases, however, eventually other insurers would fill the market vacancy. AIG insurance products, in particular, are, for the most part, not so specialized and their insureds would likely have no problem finding other carriers.
I hope this helps answer a very important and timely question on the minds of many.