By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®
When the U.S. government agreed to an $85 billion bailout of wobbling megainsurer American International Group Inc. in mid-September 2008, Power BrokerTM winners handled the crisis as expected--dutifully coming to the rescue of their clients. But how did risk managers, the buyers of AIG insurance, deal?
The judges of the Power BrokerTM Awards had a unique perspective, doing research for the project just as the AIG debacle was playing out. Thus, we got some heated and uncensored (and anonymous) reactions from risk managers.
As one might expect, some were negative, like comments from one transportation risk manager (whose take on the bailout appeared influenced by a significant, harbored grudge).
"They should have never gotten that bailout," he said. "I got one passenger policy with AIG and I'm not happy with it. I stopped writing business with AIG five years ago. ... I told my brokers don't bring me an AIG quote, I won't move on it."
Other risk managers simply seemed stunned at the unfolding events. One, a healthcare risk manager, commented, "I would worry about using AIG on any level."
Another respondent said, "I think it is the downfall of AIG, if you are asking for taxpayer money." To be continued...
Other insurance buyers were willing to walk a few miles in AIG's shoes--usually after meeting or hearing directly from AIG representatives about the travails of being, well, AIG representatives.
One hospitality risk manager mentioned, for instance, a face-to-face meeting her brokers managed to arrange in Chicago, which left her more sympathetic. After all, she recounted, the AIG folks had lamented to her how AIG expense credit cards had to be re-issued--sans any mention of AIG on them.
Another buyer--a former broker turned group captive executive--felt optimistic after he heard AIG executives speak after the second government bailout, the $150 billion in November with seemingly more favorable terms.
The message seemed to be sinking in: AIG would survive, and even if the parent didn't...
"From the P/C side, there is that wall," said another risk manager. "We've been told there is that wall up between the financial services and the insurance side, and so I feel just fine and I am keeping them on the program where they are."
Many other risk managers appeared to understand that they would have to do what was in the best interests of their employers, no matter the "horrific reputation" AIG had at the end of 2008 (or still has). AIG had to stay in the mix for them simply because it was AIG, though they had to also consider options B, C, D, E and F, just in case.
"We are also looking at ... we might not want them two times on our program if we are building a tower, but we are not shying away from them," explained one buyer.
Or as a global risk executive put it, they were "ventilating" AIG at various levels in their international and domestic towers.
In some lines and markets, risk managers realized they had no choice but to continue with AIG. Case in point: environmental in New York City where the carrier is the "800-pound gorilla," according to one real estate client.
And perhaps the ultimate practical take on the AIG crisis as it continues to develop is: Are other carriers any better?
"They (AIG) have federal funding behind them," said a risk manager. "They are better than anyone else at this point."
February 20, 2009
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