Government’s bailout expected to soothe troubled isle waters
» AIG gets $85B loan
The federal government's bailout of American International Group Inc., the parent company of AIG Hawaii, is expected to boost consumer confidence and ease the fears of some hundreds of thousands of local policyholders.
"Certainly this move probably is a good one and will stand to boost consumer confidence," Robin Campaniano, president and chief executive of AIG Hawaii, said of the $85 billion emergency loan by the Federal Reserve to save financially troubled AIG. "Hawaii consumers were well-protected anyway, but I'm glad of this additional boost because this certainly will stabilize not only our company, but perhaps give hope to the financial markets as well."
While the problems with AIG have dealt with its investment affiliates, which are separate from the insurance companies, the perception was that indirectly there would be a further tightening of credit, said J.P. Schmidt, state insurance commissioner.
"The guarantee from the federal bank will help soften that blow, but it will still take some time for them to work out all of these problems," he said. "The loan provides some confidence to the policyholders and businesses here in Hawaii that AIG will be able to get its financial house in order and continue to be a stable company going forward."
AIG Hawaii and its insurance affiliates are in good shape financially, he said, adding that the state has strict investment limitations on insurers "so they were not invested in some of these risky default swaps and other complex investments."
Carl Bonham, an economist with the University of Hawaii Economic Research Organization, didn't expect the government deal to have much impact on the local economy.
"Everybody who lives here and pays taxes now has a bigger tax bill; we all own a piece of AIG now," Bonham said. "The government is becoming a stockholder of AIG, so you now own a piece of half the mortgages in the country. If all the mortgages fail, you got to pay it."
AIG Hawaii, the state's third-largest auto carrier, insures more than 100,000 cars statewide and has well over 100,000 personal insurance policies for workers' compensation, homeowners, life and retirement plans.
The company, which expects to write nearly $120 million in premiums in the state for fiscal 2008, has been operating in Hawaii for 55 years and has 340 employees at offices on Oahu, Maui, the Big Island and Kauai.