US AIG group, the shareholder if AIG Life, AIG Romania and AIG Pensii, was saved at the last minute from bankruptcy by a 85 billion-dollar loan from the Federal Reserve, in exchange for which the state took over 79.9% of its shares.
AIG, who had been world's largest insurance group until recently, therefore became a state-owned company. AIG's shares fell by 21% yesterday, trading at 3.75 dollars (2.64 euros). The shares of the insurer lost more than 90% of their value compared with the record high of 70.11 dollars last October.
The storm on the international markets continued yesterday: Russia is going through its worst crisis of the last decade, after the Stock Exchange crashed, and Morgan Stanley is struggling to avoid becoming the next investment bank to go belly up.
In Romania, AIG has more than 500,000 clients for its life insurance products and about 270,000 for its mandatory pension fund, as well as many corporate customers of its general insurance business. Until recently, all these clients knew their savings were being managed by the world's biggest financial services group, which was probably the reason why they chose to buy insurance or pensions from AIG in the first place. Over the last two days, dozens of clients have been calling AIG Life, the second largest life insurer, to request additional information about what is going to happen to their contracts in the aftermath of this crisis.
"AIG Life Romania's clients will continue to benefit from all the conditions stipulated in their contracts, without being affected in any way. Their insurance contracts are regulated by the legislation in force and the reserves AIG Life has in Romania are a guarantee of the contractual promises made," says Theodor Alexandrescu, general manager of AIG Life.
He says that AIG group has not withdrawn any cash from Romania, even though it announced it would withdraw 20 billion dollars from its subsidiaries in 130 countries. "AIG Life Romania was not asked to transfer any cash. The clients' money are set aside as reserves, mostly invested in fixed-income instruments denominated in local currency. The investment strategy is regulated by the legislation in force and does not allow for money to be transferred," Alexandrescu says.
AIG Life posted 68 million-euro turnover last year and manages total assets worth more than 175 million euros.
According to the Insurance Supervision Commission (CSA), in case an insurance company goes bankrupt, all its obligations to its insured clients are paid by the Guarantee Fund, a body specifically set up for this purpose twelve years ago. Insurance companies contribute and the amounts collected so far amount to some 60 million euros, sources say. It is not yet known how the insured clients are reimbursed if the money in the Guarantee Fund is not enough. CSA has recently stated that AIG companies in Romania are financially stable and are operating at a profit.
As for the private pension fund managed by AIG, the supervisory authority says it is not experiencing any problems and the only problem private pensions could have as a result of the crisis is the stagnation or reduction of the yield of the investments.
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