by KYW's Salil Gutt
AIG's near death experience is causing high anxiety among those who are receiving payments not just from AIG but any insurer. The company is one of the nation's leading sellers of annuities and holders are worried about the safety of the annuity and insurance products they bought.
Regulators point out that rarely have insurance companies failed. Regulators work with weak companies to get them to raise additional capital or sell to stronger companies. Annuity owners now deal with the new company and the terms of the annuity usually remains the same.
If no insurer wants to buy the company even piecemeal then an insurer is declared insolvent. Laws require annuity and insurance owners to be paid first and in full before paying the claims of other creditors.
It is important to know that all of these actions have nothing to do with the value of the policy. If the market value of the underlying investments have declined that is a risk borne by the owner of the annuity.
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