For Immediate Release

NYSUT Member Benefits Trust monitors financial situation of AIG

Sep 16, 2008 5:56 PM

American International Group (AIG) is the provider of the voluntary term life insurance program and voluntary and group catastrophe major medical insurance plans endorsed by NYSUT Member Benefits Trust. Concerns about AIG’s financial health led the U.S. Federal Reserve on Sept. 16 to agree to a $85 billion bailout of the company.

The New York State Insurance Department issued a press release on Sept. 22 advising AIG policyholders not to make any "rash decisions" in the wake of the company's financial woes. Insurance Superintendent Eric Dinallo said, "All your covered claims will be paid and all your annuity checks will come. Making sure insurance companies are solvent and able to pay every valid claim is my number one job, and the AIG insurance companies are strong and solvent." Dinallo continued, "If you have a life insurance or annuity policy and someone tells you to replace it because of the troubles at AIG's parent company, call the Insurance Department immediately at 1-800-339-1759. Replacing or liquidating a life insurance policy or an annuity can have heavy hidden costs and tax consequences."

Read the full release at the NYS Insurance Department Web site.

NYSUT Member Benefits Trust issued the following statement regarding AIG:

Needless to say, this is a trying time for the economy. Every day seems to bring more alarming news, and this economic anxiety seems to be impacting every aspect of our lives. Here at NYSUT Member Benefits Trust, we are monitoring developments and have been particularly engaged in the financial situation of AIG.
 
As you know, Member Benefits endorses various insurance and benefit programs from a variety of companies. Among those companies is AIG, which has been the provider for many years of the endorsed voluntary term life insurance program, as well as the endorsed voluntary and group catastrophe major medical insurance plans. 
 
These past few days, AIG has been in the news due to issues surrounding the company’s financial status, including AIG’s ratings from financial-rating firms. On Sept. 15, Governor Paterson announced that New York State is allowing AIG to use certain insurance assets as collateral as the company seeks to obtain funds to strengthen its financial position. AIG will likely be looking to other sources for capital, including the federal government and the selling of some of its businesses.
 
We understand that NYSUT members who have AIG policies are concerned about these developments. The trustees of NYSUT Member Benefits Trust share these concerns and will be closely monitoring this situation as it evolves over the next several weeks. Members with AIG coverage can rest assured that Member Benefits will continue to act as an advocate to make sure that all eligible benefits are paid.
 
As always, do not hesitate to contact Member Benefits if you have further questions or concerns.

Update:

On Sept. 15, Governor Paterson announced that New York State was allowing AIG to use certain insurance assets as collateral as the company sought to obtain funds to strengthen its financial position.

Since, however, the Federal Reserve Board announced yesterday that the Federal Reserve Bank of NY is providing a two-year, $85 billion bridge loan to AIG that will ensure the company can meet its liquidity needs, the Governor's original offer is no longer needed. From NYSUT Member Benefits Trust's perspective, this is good news as we had concerns with the parent company, AIG, being allowed to borrow funds from its insurance subsidiaries.

Most importantly, members who have policies with AIG insurance subsidiaries should note these following points provided by AIG:

• The AIG insurance subsidiaries that provide Member Benefits-endorsed insurance programs are not experiencing financial difficulty, although their financial ratings dropped slightly due to their connection with the parent company.
• The NYS Insurance Department has made positive comments in the media regarding the financial strength of the AIG insurance subsidiaries.
• As a highly regulated industry, insurance companies are required to maintain enough capital and surplus to satisfy their obligations to their policyholders. The type and quality of investments in which insurance companies may invest surplus capital is also limited by state law.
• Although various companies owned by AIG are part of the larger holding company, each company is individually responsible for the liabilities associated with the policies that it offers.

In summary, AIG assures us that policyholders should not be concerned at this time as its insurance provider will continue to pay claims and provide valuable coverage.

If you would like to learn more about AIG's financial rating downgrade, why AIG needs to raise capital and other matters concerning this issue, please see the attached Frequently Asked Questions PDF dated Sept. 16, provided by AIG American General.

• DOWNLOAD: AIG Frequently Asked Quesions for Policyholders [PDF 100K]