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For immediate release: Tuesday, September 30, 2008
For more information: contact Merle Scheiber, Director, Division of Insurance, 605.773.3563
AIG Problem Diminished by State Regulation of Insurance
(PIERRE, SD) – An official with the South Dakota Department of Revenue & Regulation’s Division of Insurance says the recent financial difficulties experienced by the American International Group (AIG) show that state regulation of insurance is working.
According to Division Director Merle Scheiber, the holding company, which is federally regulated, was the source of the problems while AIG’s state-regulated insurance companies remained financially viable.
“There are about 70 U.S. based AIG insurance companies and none of them are in financial difficulties, despite the AIG holding company federal bail-out,” Scheiber said. “Without the financially strong insurance companies, the AIG bail-out might never have been possible.”
AIG’s problems were the result of the conglomerate’s non-insurance entities that were regulated either by the U.S. Office of Thrift Supervision for the U.S. financial holding company, or by an “integrated financial regulator” in the case of the non-U.S. entity. Although advocates of federal regulation cite AIG as an example of the need for federal regulation of insurance, Scheiber says it was insufficient federal oversight which allowed the AIG problem to be created in the first place.
“Had states not done their job and ensured that the AIG insurance companies were financially sound, the AIG problem could have been worse. It’s my belief that Congress needs to move in the opposite direction and return full regulation of all aspects of insurance to the states, “stated Scheiber.
Scheiber says the South Dakota Division of Insurance as well as insurance regulators in other states will continue to closely monitor the situation to ensure policyholders are protected to the greatest degree possible. Individuals who have further questions or concerns are encouraged to contact the South Dakota Division of Insurance for assistance at 605.773.3563 or by email at insurance@state.sd.us.
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