Update: NAIC Task Force to Oversee Possible Sales of AIG's U.S. Insurance Divisions

NATIONAL HARBOR, Md., Sep 24, 2008 (A. M. Best via COMTEX) -- AIG | Quote | Chart | News | PowerRating -- New York Insurance Superintendent Eric Dinallo, chairman of a new National Association of Insurance Commissioners task force, said he expects American International Group Inc. to begin selling state-domiciled units within weeks to satisfy its $85 billion bailout loan from the Federal Reserve Bank of New York.

The sales could involve some of AIG's 71 insurers domiciled in 19 states, representing roughly one-third of the total number of AIG subsidiaries. The role of the task force will be primarily to provide constant communications between the various state, federal and international regulators, Dinallo said. It will also work to ensure that policyholders are protected and that there are no allegations of unfair practices by potential buyers, he said.

"This is an unusual situation where you want to compare them all simultaneously," Dinallo said.

The states may agree to use a common template for AIG sales, a step that could be accomplished without regulatory changes, Dinallo said. Because AIG will sell assets "holistically," a single regulatory framework could streamline oversight in way that benefits AIG and consumers.

"These will be very straightforward transactions," said Pennsylvania Insurance Commissioner Joel Ario, vice chairman of the task force.

"We could try to come up with an 'AIG form' to just make it easier and that would be a big help," Dinallo said. "We could do it very quickly."

New AIG Chief Executive Officer Edward Liddy said he expects to complete within seven to 10 days a list all of the AIG (NYSE: AIG | Quote | Chart | News | PowerRating) assets that would be put up for sale. Following the transactions, he said, AIG would look a lot like it did prior to 1998-99, with a focus on property/casualty and international business, and less attention to financial services (BestWire, Sept. 23, 2008).

"It probably would have been better if they'd stayed with that (structure) from the beginning," Ario said.

NAIC President Sandy Praeger said consumers will have nothing to fear if the insurance companies they have policies with are sold by AIG. "The only thing that changes is the name at the top of the policy," she said.

Insurance commissioners sought to again reassure consumers that the state-regulated AIG companies writing their policies are secure. AIG's problems are at the holding company level, which is regulated by the federal Office of Thrift Supervision.

"The issue of solvency, the premiums behind their policies, are safe and secure and sound," Dinallo said.

Commissioners decried efforts by proponents of a federal insurance regulator, including the American Insurance Association and the American Council of Life Insurers, to cite the AIG crisis as an example of why a federal regulator is warranted.

Ario said such an argument is simplistic and shows "political chutzpah," as the meltdown of AIG's holding company happened under the federal OTS' watch.

(Clarifies information in the headline and the second paragraph about the number of AIG subsidiaries that could be involved in a sale.)

(By Sean P. Carr, senior associate editor, BestWeek: Sean.Carr@ambest.com)

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index