AIG and Canadian Life Insurance Policy Holders

Sep 16th, 2008 – Comment

Lou, Long time AM640 listener, first time e-mailer! I wonder if you can tell me, what exactly happens if say, AIG goes bankrupt. What happens to Canadian life insurance policy holders? Thanks Steve Hi Steve Any insurance company operating in Canada has to follow Canadian laws and would have to set up a resident corporation […]


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We are not in Kansas anymore

We are not in Kansas anymore

Lou,

Long time AM640 listener, first time e-mailer! I wonder if you can tell me, what exactly happens if say, AIG goes bankrupt. What happens to Canadian life insurance policy holders?

Thanks
Steve

Hi Steve

Any insurance company operating in Canada has to follow Canadian laws and would have to set up a resident corporation to do business here.

There are two organizations set up to deal with a bankrupt insurance company one handles life the other property and casualty. Check out these sites for more details.

http://www.assuris.ca/

http://www.pacicc.com/

To your question typically the policies are transferred to a solvent company. As with all these compensation schemes such as FDIC and so on, they are all based on the assumption that their assets will cover the liabilities.

But lets face it we are not in Kansas anymore and the potential for catastrophic liabilities could wash out the assets of these funds. I know the FDIC in the US has been tested with the failure of IndyMac and there has been speculation that they will have to seek an infusion of cash from the U.S. government to cover future bank failures, of which there are said to be over 100 on the bubble.

As far as AIG goes the charts have been screaming to investors to get off the ride for some time. The company has got to raise nearly double what it had estimated only last week and that number looks to be somewhere north of $70B.

It’s not pretty but that’s the story. To be blunt this is a fly or die scenario for the company so take the appropriate action.

Happy Capitalism!

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