Q: Would the State Insurance Regulators Have Seized the Insurance Companies if AIG had Filed for Bankruptcy?

  • (p9) - Mr. Bensinger added that the New York Department of Insurance stated that it would seize the New York insurance companies if AIG went into bankruptcy.
    • Mr. Herzog agreed and stated that, based on his discussions, other insurance commissioners would likely do the same.

2008 0916 - AIG Board of Directors Minutes 9/5/2008 - 24p

  • If AIG had gone bankrupt, state regulators would have seized the individual insurance companies.

2010 0202 - WSJ - Eric Dinallo - What I Learned at the AIG Meltdown: State Insurance Regulation Wasn’t the Problem - [link]  

  • (p141) - Chair Elizabeth WARREN. So I want to be clear, if I can, about setting the stage a little bit for this panel.
    • If you’ve read the testimony from the Fed and we’ve had multiple meetings now with the Fed, they basically have made the argument that negotiation was simply not possible, and that it was not possible because negotiation under these circumstances, particularly in the case of rapid dissent, is never possible, that ratings downgrades would have triggered multiple cross-defaults and contagion throughout the market, and that the insurance regulators would have seized the insurance companies and therefore destroyed the value of the entity and possibly caused losses to the insured, people around the country.
    • So the reason we asked this panel to come is that we wanted to probe that claim.
    • That’s what we’re here about, to just push back on this alternative.

2010 0526 - COP - TARP and Other Government Assistance for AIG - [PDF-241p

  • 2021 - YPFS Lessons Learned Oral History Project: An Interview with Eric Dinallo - 19p
    • (p17-18) - Eric Dinallo [to Tim Geithner]:. If you file for bankruptcy at the holding company level...
      • Some states may even require by law … that the states will seize the operating companies, because the holding company filed for bankruptcy.
      • They're going to pull up the drawbridge, and go into castle mode.
      • Then you're going to have a run on insurance companies.