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Panic over the security of American International Group Inc. will get insurance buyers nowhere, and brokers, particularly those from the largest firms, seem to understand that keeping a level head for their clients is the best bet.

A survey of brokers released in October by Advisen Ltd., an information service for the commercial insurance industry, found 75 percent of respondents described their attitude toward the financial strength of the AIG insurance subsidiaries as "very confident" or "somewhat confident." A remaining 21 percent were "somewhat concerned," while 3 percent were "very concerned" and 1 percent had no opinion.

"There seems to be some concern among both risk managers and brokers as AIG burns through the loan with little apparent success in selling assets, but nothing we've detected so far that materially changes any of the survey results," said Bradford in an e-mail message.

The key words are "so far." AIG maintains that it will keep its core commercial property/casualty insurance operations and that they are insulated from volatility in other parts of the company due to insurance regulations. Indeed, all indications so far are that AIG's insurance operations are profitable.

But if the last few months have taught us anything, it's that no crystal ball exists that can predict the future of the financial sector. Absent an accurate fortune-telling device, brokers have been taking an appropriately careful stance when it comes to advising their clients.

Advisen's survey found that 98 percent of responding brokers have been in contact with their AIG policyholders. Many (38 percent) provided information only, while 23 percent of brokers recommended their clients take no action at present. Another 23 percent offered to get quotes to potentially replace AIG. No one recommended that their clients replace AIG, even if it meant paying higher premiums.

Speculation continues that at least some of AIG's P/C businesses will be put up for sale. Survey respondents were split fairly evenly on the question, with 46 percent saying AIG will be forced to sell core commercial P/C insurance businesses and 42 percent arguing the opposite.

Generally speaking, brokers with the Big Four were more confident in AIG's security than respondents from smaller firms. More than three quarters of all respondents said they support the U.S. government's loan to AIG, while 90 percent of respondents from the largest four brokers supported it.

On average, Advisen found that AIG policyholders with smaller brokerages are more frequently instructing their brokers to replace AIG at renewal than are customers of the larger brokers. Smaller brokers are also more likely to believe that AIG will sell core P/C businesses.

Advisen conducted its survey from Sept. 26 to 30. Of the 611 respondents, a majority, 65 percent, were executive management, while the rest were mainly producers or marketer/brokers. Almost 20 percent represented one of the four largest brokerage firms.

Bradford said Advisen is not planning any follow-up surveys regarding AIG for now.

--Erin Gazica

December 1, 2008

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