Since AIG is seeking over $40 billion in loans from the Feds to offset their $18.5 billion in losses from, what else, the mortgage industry, a lot of AIG insurance policy holders are wondering what the future may hold for them. Sure, they didn’t get bought out like Merrill Lynch did, and they are not filing for bankruptcy like Lehman’s, but they are still in some trouble with those losses. There is a good article over at Smart Money about what AIG can expect in the near future in light of what is going on:
Policy buyouts – To raise capital, it’s likely that AIG may try to sell some of its personal insurance divisions.
Higher taxes are unlikely – Because the floundering insurer has a number of options in which to raise capital, the Fed is unlikely to grant AIG the $40 billion bridge loan it requested. Even if it did approve lending the vast sum, taxpayers would only be on the hook if AIG went under.
Worst-case scenario: a wave of uninsured – If AIG suffers a complete meltdown before it’s able to sell off its insurance divisions, many consumers will no longer be insured. However, policyholders will have plenty of time to come up with a backup plan. “An insurance company wouldn’t go out of business tomorrow,” reassures Simmonds. “Regulators wouldn’t allow that to happen. There would be a gray period.”
Go check out the rest of the article to see what else might be in store for both policyholders and taxpayers alike. I just hope there is not another government bailout giving away tax money to prop up yet another public company. Enough is enough; let the chips fall where they may.