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Originally Posted by Indy Coug
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There is a lot of devil in those details. It is true that there are regulations regarding insurer solvency, although the reserves can be manipulated and many of the state by state regs can be circumvented in various ways.
It is also true that many states have a guarantee association that is funded either by other insurers (mandatory participation) or by the state or both. These guarantee associations vary rather dramatically in how they operate, however and in how much relief they give any given policy holder or third party claimant. It is not accurate, in my mind, to say that the government is required by law to stand behind those obligations. It just doesnt' work that way. Moreover, I have never seen a carrier the size of AIG throw its obligations onto a g-tee association. It would potentially be catastrophic in its effect on the insurance markets, as I am sure you apprecaite more than probably anyone here.
I am a ltitle freaked out by the AIG situation, to tell you the truth. It bothers me more than the other bankruptcies. THis is a HUGE company with huge policy obligations and a huge role in the guarantee market and that would have all ground to a halt if there was a bk. It is a little frightening.