I could not believe myself when heard one of the largest insurance company in the world going to bankrupt. But Malaysia AIG and AIA had issued a statement that the Malaysia based company is still going strong.
AIG nearly declare bankrupt if not saved by FED. All these happened because they do not have enough capital to sustain. AIG has many different business groups around the world, if FED doesn’t help them, AIG bankrupt, the Investor & Customer will suffer and eventually will directly impact to FED also. People no money and can’t pay the tax; at that time will be serious economic crisis.
FED didn’t bail out Lehman mainly because when there is market uptime, they gain the profit while don’t share the profit. But when have bad time, and then ask FED to help by using tax payers money.
A lot of AIG policy holders in Hong Kong and Singapore is terminating their policies. But Malaysia’s AIG and AIA had issued a statement that the Malaysia based company is still going strong.
For my opinion, Malaysia will escape this financial tsunami since our banks are too conservative and very picky on approving loan. But our export demand could be affected since the global economic growth gets into trouble.
So far there’s never an insurance company bankrupt or close down in Malaysia. Usually they more likely being merged or being bought over only.
What Should We Do?
My advice is don’t blindly surrender your insurance policy with fear of AIG will close down. This may eventually suffer great losses from your policy. If you still want to surrender as feel not comfortable to proceed with the policy, then should calculate the possible risk and losses carefully. If your policy’s potential return was not large enough to justify the risk then just liquidate.