Friday, January 1, 2010
"An independent analysis of whether the insurance industry has been setting aside enough money to pay its claims estimates that the [AIG] has a shortfall of $11.9 billion in its property and casualty [P&C] business. The conclusion is at odds with the often-repated refrain that AIG's troubles can all be traced to its derivatives portfoliom and that its insurance operations are sound. ... In a report distributed to clients on Monday, the investment research firm Sanford C. Bernstein pointed to a big shortfall in AIG's [P&C] insurance business--which has been renamed Chartis and is intended to be the future core of the company's operations. ... Todd R. Bault ... said the inadequacy of AIG's reserves had grown in recent years--'nearly the opposite behavior that we would expect,' since the claims-paying reserves of other insurance companies had been growing. ... Bault saaid inadequate reserves could prompt regulators to penalize AIG, or customers to flee. Once he had excluded AIG from his industrywide data, he wrote, all other companies appeared to have more than enough reserves", Mary Walsh at the NYT, 1 December 2009, link: http://www.nytimes.com/2009/12/01/business/01aig.html.
If Bault is right, where was PriceWaterhouseCoopers or the NY State Insurance Commission in recent years? See my 8 October 2008 post: http://skepticaltexascpa.blogspot.com/2008/10/yves-smith-on-aig.html.