Does AIG LIFE Companies have enough in reserves to cover claims? Clients will not be able to make premium payments on their Life policies, which will put pressure on AIG. The low interest rates on bonds and most concerning will be Asset Back Mortgage defaults in the future.
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Insurance companies must have cash/liquid options on hand to cover claims. "Reserve requirements for an insurance company are determined by the state in which the company is doing business. The purpose of the reserve requirement is to ensure that if a catastrophic event were to happen, with a large percentage of policyholders affected, the company would have enough money to meet the claims." www.finweb.com › insurance › how-are-insurance-company-reserve-am.
Bank reserves are handled differently.
Heard Fed is going to relax capital rules for banks to help deal with crisis. Wouldn't be surpirised to see the same for insurance companies.
Our capital position, combined with the Fed willing to buy corp bonds will put a floor under market. But I expect a very rough ride short term.
I wouldn't worry about the low interest rates on bonds for now - the mark to market losses to the bond portfolios are a bigger concern.
In the past 2 weeks, IG Corporate Bonds have given up most of their gains for the past 10 years.