TODAYonline

Don’t panic, says MAS

Hundreds queue to cash inAIA life insurance policies

Ong Dai Lin and Kelvin Chow

dailin@mediacorp.com.sg

HUNDREDS OF anxious policyholders thronged insurer AIA Singapore’s Customer Service Centre in Finlayson Green — many of them arriving well before it opened at 8.45am yesterday.

Many wanted to surrender their life insurance policies, fearful about the company’s stability.

AIA is a subsidiary of insurance giant AIG which is scrambling to prevent its own collapse.

But yesterday, the :Monetary Authority of Singapore (MAS) came out to assure people: Don’t panic. The financial regulator cautioned that policyholders could lose out by cashing in policies early.:

MAS said: “AIA currently has sufficient assets in its insurance funds to meet its liabilities topolicyholders. Policyholders should, therefore, not act hastily to terminate their insurancepolicies with AIA as they may suffer losses from the premature termination and lose the insurance protection they may need.”

While there were indeed no signs of actual panic, there were many prepared to wait several hours.

Retiree Alan Cheong was one of the concerned AIA policyholders who queued up yesterday at the service centre to cancel their policies — or at least to ask what was going on. He told Today: “I heard the news on the television and I was worried that the company might close down.” The 52-year-oldarrived at 10am and waited four hours to get all theprocedures completed.

“I closed my account,” he said. “The staff told me that they are different from AIG in US and they are doing okay. But I still feel safer closing down myaccount.”

Housewife Mrs Grace Ong was there to ask about her endowment fund. She said: “I pay about $100 to AIA per month. It is not a big sum of money but I’m still worried.”

Shipping officer Mr Azman, 35, said: “I told my friend and we decided to come together because we don’t know anything about how our money is being invested by them. The staff told me that I don’t need to worry and the company is safe — but everyone will say that.”

Customers appeared to be more concerned about their life insurance policies than general insurance, such as fire policies.

AIG’s general insurance arm here is called American Home Assurance Company Singapore. It said call volume had been “consistent with any normal day of service activity”.

“Although AIG faces short-term liquidity pressures, we have a strong well positioned business in diverse markets around the world and a deep asset base,” said its president Kevin Goulding.

Mr Mark O’Dell, general manager of its life insurance arm AIA Singapore, said: “The funds maintained in Singapore are segregated from AIG and are held specifically for the purpose of meeting our obligations to policyholders.”

Policyholders surrendering early generally get far less than if a policy matures — but people were prepared for that. “Any amount that I get back will be fine,” said

Mr Ken Loh, 36, who runs a security business. “I want to play safe.”

AIG is the biggest provider of commercial insurance in the United States, one of the biggest writers of life assurance there. It also has enormous global operations. Its financial products division is at the heart of the group’s current problems.

The US authorities have thrown a US$20 billion ($29 billion) lifeline to AIG while convening a fresh set of emergency talks at the Federal Reserve in New York to find potential sources of funds for the insurer. US investment bank JP Morgan has been asked to help arrange private sector financing for AIG.

The deal between AIG and New York state insurance regulators allows the company to access US$20 billion of assets from its own subsidiaries to use as collateral for a loan.

However, it may prove difficult for AIG to juggle with its money in Singapore.

A MAS spokesperson said: “Assets of individual insurance funds maintained by Singapore registered insurers under the Insurance Act can only be used to meet the liabilities of the respective fund. Insurers are also required to maintain ownership of the assets.”

Those assets may be used as collateral, but would then not qualify as resources to meet the insurer’s liabilities to policyholders, MAS added.

“As with all insurance companies in Singapore, AIA is required under the Insurance Act to maintain statutory insurance funds, including an investment-linked fund. Within these insurance funds, AIA must maintain sufficient assets to meet all its liabilities to policyholders, which include participating policies and investment-linked policies,” MAS said.

“The value of these assets is not linked to AIA’s or AIG’s financial condition, but like all investments, their value may be affected by general market conditions. We are monitoring the situation closely.”

AIG Singapore, founded in 1931, has more than 2 million policies in force. AIA has set up a dedicated hotline for worried policyholders: 6248 8355. Additional reporting from Agencies