If AIG goes under, what happens to ma and pa who purchased their 6% guaranteed payout annuity from AIG? Is there some sort of govt insurance backing annuities? If so, where the f#$% is the government going to come up with that money??
Good question. I was wondering the same about policyholders with property in TX that was damaged by Ike. Maybe there’s some kind of reinsurance arrangement to cover that? I don’t think the media has really paid much attention to this.
Not sure if this article would answer your question, but it might help: http://money.cnn.com/2008/09/16/news/companies/aig_questions/?postversion=2008091613
Good question, I’ve been wondering that too and I actually used to work in insurance, what a cluster! We take your money and buy bonds, assets that match the liability, it is interesting, you actually try to specifically match various pools of policies from specific years with specific bonds…like this guy’s policy maps with this bond. When we had a CDO go bad early this year we moved it out of the insurance portfolios into surplus (the extra stuff not specifically backing policies) and replaced it with a good bond. They should have a specific pool of fixed income assets backing the their annuity portfolio. But seriously who knows what happens with the shift hits the fan, never seriously thought about an insurance company blowing up. Thank god I’m not in insurance anymore…
AIG is too busy paying Lehman’s rent: Lehman’s London Landlord Says Rent Payments Are Insured by AIG 2008-09-16 15:20:16.970 GMT By Peter Woodifield Sept. 16 (Bloomberg) – Lehman Brothers Holdings Inc.‘s London landlord, Songbird Estates Plc, said rent payments on the bank’s offices in the Canary Wharf financial district are insured by American International Group Inc. Lehman filed for Chapter 11 bankruptcy protection yesterday and AIG, the largest U.S. insurer by assets, is struggling to raise cash to keep the company afloat. AIG is committed to paying up to four years of rent in the event of a default, Songbird said a statement today. Lehman pays 41 pounds ($72.82) per square foot annually for 1 million square feet (93,000 square meters) at 25 Bank St. The rent is set to rise to 51 pounds a foot in November. The downgrade in AIG’s credit ratings means it must post collateral or have its commitment ``guaranteed by an entity with specified credit ratings,’’ Songbird said. Canary Wharf Group, a unit of Songbird, expects talks with Lehman’s administrator to start shortly, the company said.
The annuities are kind of protected in that you are a creditor but wildly high on the food chain. My step father had an annuity with a company that went under and the annuity ended up being paid at a 3% rate or something by another company instead of the 6% rate he signed up for. Fortunately, he had the good sense to die and take the death benefit which was paid in full.
Found it! There’s protection…but not a lot… http://www.fsdfinancial.com/State%20Guarantee%20Associations.htm
Found it! There’s protection…but not a lot… http://www.fsdfinancial.com/State%20Guarantee%20Associations.htm
Yeah, but that’s from the state guaranty associations. If you had a $2M insurance policy and the company went under, you would have a $2M claim against the company.
I think I’ll stick with CDs for a while (less than 100K of course)
I’m with you on that…