How AIG's turmoil affects you

DES MOINES, Iowa — The financial problems at American International Group may be causing you great concern today if you hold an AIG life, health-, home- or auto-insurance policy, or have an annuity with the company.

Insurance-industry officials and analysts say there's little for policyholders to worry about today, but add they're watching the situation carefully because the potential impact in the United States for insurance policyholders is significant.

The Insurance Information Institute says AIG is among the top 10 insurers of fixed annuities sold through banks. Fixed annuities guarantee the principal and fixed payments to the buyer for a specified period of time, usually until death.

AIG also ranks among the top writers of auto insurance, commercial insurance and life insurance.

It led the nation in fixed annuities sold through banks, writing more than $5 billion in 2007. AIG also led in commercial insurance, writing $24 billion in policies in 2007.

AIG is the eighth-largest property and casualty insurer in Washington state ($290 million in premiums written) and the fourth-largest insurer of annuities ($179 million in premiums), the state Insurance Commissioner's Office says.

Here are answers to some questions about where AIG's insurance businesses stand and how it may affect you.

Q: What does AIG sell in Washington state?

A: AIG is the parent company of several insurers in the state that sell home, auto, and life insurance and annuity products. If AIG declared bankruptcy, each insurer it owns likely would be place in receivership to protect its assets from the parent company.

Policyholders in the state are protected by two guarantee associations, one of which would pay claims if AIG were forced to shut down.

To see if your insurer is owned by AIG, visit the state Insurance Commissioner's Web site at www.insurance.wa.gov and scroll down to "latest news" for more information and a list of AIG insurance companies in the state.

Or call the office at 800-562-6900.

Q. Should I be worried if I have health- or life-insurance policies with AIG? What if I have a retirement annuity?

A. First, keep in mind AIG continues to operate. It has not filed for bankruptcy protection and has not been declared insolvent. Even if the insurance portion of the business was for some reason declared insolvent, there are protections similar to the FDIC insurance that backs bank deposits.

Life and health insurance, and products like annuities, are covered by insurance-guarantee associations that have been established in every state, said Peter Gallanis, president of the National Organization of Life and Health Insurance Guaranty Associations. The associations step in when state insurance regulators declare a company insolvent and it's placed in receivership.

The level of coverage may vary by state, but every state association provides withdrawal and cash-value coverage for annuities of at least $100,000. About a dozen states offer up to $300,000 and a few others offer up to $500,000.

Life-insurance policies are backed up with at least $300,000 in life-insurance death benefits and $100,000 in cash surrender or withdrawal value. States offer at least $100,000 in health-insurance-policy benefits.

In the past 25 years, more than $20 billion in coverage benefits has been provided by the state associations for policyholders and annuity clients of dissolved insurance companies. In that time, the associations have provided protection for more than 2 million policyholders and worked on more than 60 multistate insolvencies.

Q. What should I do if I hold a homeowner's or car-insurance policy with AIG?

A. Every state, the District of Columbia, Puerto Rico and the Virgin Islands have established property-guarantee funds similar to those established to protect against losses in life and health insurance.

Guaranty funds generally pay the amount of coverage stipulated by the policy or $300,000, whichever is less. Each state has a law that places a cap on the coverage and some have higher amounts. New York, for example, has a property/casualty cap of $1 million.

Most state guarantee funds pay all of their state's workers' compensation benefits.

Since the late 1960s, the property/casualty guarantee system has paid out about $21 billion in claims on behalf of insolvent insurers. About $10 billion has been disbursed in the last six years, largely because of the frequent and severe hurricanes that have struck the Gulf Coast.

Since 1976, there have been about 600 insolvencies of property and casualty insurers. There are 2,648 property/casualty insurers licensed to do business in the United States.

Q. What is going to happen to the insurance businesses owned by AIG?

A. The infusion of $85 billion into AIG offers financial stability so the company will have time to decide which assets or business segments it should sell and to whom. It hasn't been disclosed whether the insurance segment, or portions of it, would be sold.

"We believe the insurance subsidiary to be financially sound and continues to be sound today," said analyst Joyce Sharaf of A.M. Best, a main insurance-rating companies. She said AIG holds major insurance businesses that "are enviable franchises that could be sold in whole or in part."

Analysts believe policyholders are safe for now, said A.M. Best analyst Marc Steinberg.

Seattle Times staff contributed to this report.