American International Group

(redirected from American Insurance Association)
Also found in: Dictionary, Medical, Financial, Acronyms.

American International Group

American International Group (AIG), American multinational insurance corporation whose potential bankruptcy in 2008 led to the largest federal bailout of a private company. AIG was founded as American Asiatic Underwriters by Cornelius Vander Starr in 1919 in Shanghai, China; it soon expanded internationally and became known as American International Underwriters. With the advance of Mao Zedong's Red Army on Shanghai in 1949, Starr moved the headquarters to New York. In 1962 Maurice R. “Hank” Greenberg (1925–) took over leadership of the company; he remained its head until he was forced out as chief executive in 2005 because of transactions that created overstated earnings reports (he settled the civil accounting fraud changes arising from the transactions in 2017). Greenberg expanded AIG by buying up numerous insurance and other financial firms. The company, which assumed its present name in 1967, became one of the largest insurance companies in the world. In the 2000s, however, AIG incurred huge losses relating to subprime home mortgages, both its own and those of other companies and banks it had insured against losses on mortgage-backed securities, although many AIG businesses remained profitable.

By 2008 bankruptcy loomed due to a downgraded credit rating and increased calls for collateral required by the insurance on the mortgage-backed securites. The Federal Reserve Bank, concerned over potentially far-reaching repercussions to the international financial system should AIG fail, agreed to give AIG a line of credit for up to $85 billion in exchange for 80% of its stock, effectivily nationalizing the company. Eventually the Federal Reserve Bank and U.S. government increased their potential support to more than $182 billion through investment and credit lines and by buying mortgage-backed securities. The Treasury Dept. ultimately owned more than 90% of AIG before beginning to sell off shares in 2011. AIG sold a number of its profitable assets in order to pay back the U.S. government, and recovered from its near collapse in 2009. The bailout became controversial because large bonuses were paid to many AIG employees after the bailout (though these were largely later returned) and because some of the financial firms, such as Goldman Sachs, that benefited from the financial stability the bailout was designed to preserve also received sizable payments from AIG after the bailout. Goldman Sachs was also accused by some at AIG of having misled AIG over the quality of the mortgage-backed securities that AIG insured. In 2011 Greenberg brought a class-action lawsuit for damages against the government, contending it had exceeded its authority in demanding its stock in return for aid. The 2015 verdict said the government had had no right to demand the ownership control of AIG, but did not award damages because the company would have become bankrupt without the government aid.

The Columbia Electronic Encyclopedia™ Copyright © 2022, Columbia University Press. Licensed from Columbia University Press. All rights reserved.
Mentioned in ?
References in periodicals archive ?
Tiffany O'Shea, public affairs director for the Southwest regional office of the American Insurance Association, agrees that the insurance industry is heading in that direction.
Many organizations, including the American Insurance Association and the American Counsel of Life Insurers, have already submitted comments with recommendations for changes to E-Sign.
Currently, Corless serves on the board for the Sparrow Foundation of Lansing, a strong supporter of the Mid-Michigan chapter of the American Red Cross, a member of C200, a board member of the National Council on Compensation Insurance as well as a member of the board of directors for the American Insurance Association.
The American Insurance Association wants state insurance regulators to consider adopting model legislation to allow the creation of "sandboxes" that would waive some regulatory requirements for insurers looking to test and implement innovative products and technologies.
The American Insurance Association lobbied strongly in opposition to the provision.
Phillip Schwartz, vice president-accounting and financial reporting for the American Insurance Association, told the Working Group on Loss Reserve Discounting meeting of the National Association of Insurance Commissioners that "insurers should not be permitted to value any loss reserves on a discounted basis other than those reserves where discounting already may be permitted by statute or regulation."
"It is prudent to take action before an earthquake or hurricane to diminish damages,"' said Marc Racicot, president of the American Insurance Association (AIA).
MARC RACICOT, former governor of Montana, and now president of the American Insurance Association, responded to points in a letter from state legislators to the National Governors Association urging governors to oppose an optional federal charter.
"The best thing to do is to extend the program and get two more years of data," said Gary Karr, director of federal media relations at the American Insurance Association. "Congress can have extra time to evaluate the program and decide what kind of policy we ought to have."
The petition was filed by the American Insurance Association, the Association of California Insurance Companies and the Personal Insurance Federation of California.
And no matter how close to success the "modernization" effort came in 1997, 1998 is an election year, and members of Congress -- including Senator D'Amato, who's up for re-election in November -- are loath to risk losing the financial largesse of either the American Bankers Association or the American Insurance Association. Already, D'Amato has tried to distance himself from the issue, announcing that he won't waste any more time hawking comprehensive reform until the House manages to pass a bill.
Commissioner Donelon appointed industry and community leaders to serve as members of the task force including Representative Kirk Talbot, chairman; Senator John Smith, vice chairman; Senator Wesley Bishop; Rich Piazza, Louisiana Department of Insurance and representatives from each of the following: Property Casualty Insurers Association of America; American Insurance Association; National Association of Mutual Insurance Companies; Professional Insurance Agents of Louisiana; Louisiana Association of Justices; and Louisiana Motor Transport Association Inc.

Full browser ?