Asian policyholders cut ties with AIG

By Alex Kennedy ASSOCIATED PRESS | Thursday, September 18, 2008

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SINGAPORE (AP) – Gary Tan had seen enough. From the beginning of the week, the 51-year-old Singapore taxi driver had resisted fears that his accident and life insurance policies with American International Group's local unit were in jeopardy.

Finally on Thursday, even after the U.S. Federal Reserve pledged a $85 billion loan to prop up AIG, he joined thousands of other policyholders this week at the company's downtown headquarters clamoring for answers.

"I still don't know if I'll cash out my policies, but I want to talk to them about it," Tan said as he was given a number for an appointment on Friday morning. "I know the U.S. government is backing them, but who knows what will happen next."

The impact of the deepening turmoil of the U.S. financial system is rippling across the globe, as nervous AIG policyholders in Singapore, Hong Kong, and South Korea lose faith that the Fed's bailout will staunch the crisis.

AIG provides services in 130 countries, including China and Japan.

AIG's local unit, AIA Singapore, has become a focal point for anxious policyholders, many of whom are nearing or at retirement age. The company, which was founded in 1931 and has more than 2 million policies in force, sought to calm fears, insisting all policies are safe.

"AIA Singapore has more than sufficient capital and reserves above the regulatory minimum requirements, to meet our obligations to policyholders," the company said in a statement this week. "Although AIG faces short-term liquidity pressures, we have a strong, well-positioned business in Singapore."

Management at AIA Hong Kong were also quick to stress the company keeps separate books from AIG. AIA Hong Kong said about 2,000 policies were terminated on Tuesday and Wednesday, as panicked policyholders flooded the company's offices.

"Our financial situation is very sound," Derek Yung, the company's senior vice president and general manager, said at a news conference Thursday.

Singapore's central bank, known as the Monetary Authority, also cautioned policyholders to not "act hastily to terminate their insurance policies with AIA."

That hasn't stopped many Singaporeans from doing just that, although AIA Singapore won't disclose any figures on cancellations.

Goh Hui Sze, 62, said he cashed out his life insurance policy three months ago to invest in his family-run restaurant. On Thursday, he was in line with his wife at AIA to cash hers out too.

"I wish I'd taken care of my wife's policy before," Goh said. "We're going to need all the money we can get if the economy goes bad."

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AP Business Writer Jeremiah Marquez contributed to this report from Hong Kong.

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