HK, watchdog monitor AIA as crisis hits parent
Officials, regulator will keep eye on city's largest life insurer
The Hong Kong government and the insurance regulator are keeping a close eye on American International Assurance, the largest life insurer in the city, after parent company AIG became the latest focus of the US financial meltdown.
AIA has more than 1 million life insurance policyholders and is the fourth largest pension provider in the city, covering 600,000 employees.
Some Hong Kong policyholders rushed to AIA's Causeway Bay office or called their agents yesterday, worried about the fate of their policies as the US insurance giant American International Group saw its share price in New York plunge 61 per cent on Monday, and a further 32 per cent in early trading yesterday.
It was also downgraded by credit rating agencies - a move that will make it harder to raise funds. Moody's Investors Service cut AIG's rating two notches yesterday to A2 from Aa3, while S&P lowered the rating to A-minus from AA-minus.
AIA has a Hong Kong market share of 16.2 per cent, or HK$21.51 billion of premium income in life policies in 2006, according to the latest annual report by the Office of the Commissioner of Insurance.
AIA Pension and Trustee is the city's fourth largest pension provider with 600,000 employee accounts and HK$40 billion worth of assets under its management.
Financial Secretary John Tsang Chun-wah said the government was closely monitoring the situation. The insurance authority would act accordingly to protect the interests of policyholders. 'AIG is facing a global problem and its policyholders all over the world are affected similarly,' Mr Tsang said.
'The insurance authority has a wide range of statutory powers to protect the interests of policyholders and to ensure industry players are operating under a sound regulatory framework.'
The insurance regulator in Hong Kong said AIA had a solid financial performance and was capable of covering the insurance liabilities of policyholders.
Clement Cheung Wan-ching, the commissioner of insurance, said: 'AIA in Hong Kong has arrangements with its parent company to ensure its Hong Kong business is operated as a separate entity. The next two to three days will be critical moments of decision for the whole insurance group.'
AIG Hong Kong's office issued a statement yesterday to reassure policyholders.
'Although AIG faces short-term liquidity pressures, we have strong, well-positioned businesses in diverse markets around the world and a deep asset base. We can assure our customers of AIG's commitment to meeting their needs and keeping their business,' the statement said.
'The insurance policies written by AIA Hong Kong are subject to stringent regulatory and capital requirements. AIA Hong Kong is well-capitalised and will continue to operate in the normal course to meet our obligations to our policyholders in Hong Kong and Macau.'
A spokesman for the Mandatory Provident Fund Schemes Authority said it would also closely monitor developments at AIG.
An AIA insurance agent, who wanted to be known as Mr Yip, said: 'Management in Hong Kong was in a meeting with the Asia-Pacific team all day. Since it affects every policyholder of AIG worldwide, it's impossible for the US government to let the company close down.'
An executive from AIG Hong Kong, who did not want to be identified, said the company's hotlines were ringing constantly from worried clients.
'The phone kept on ringing as many customers have inquiries about the implications of their policies. Our colleagues have tried their best to assure them that the Hong Kong operations are fine and well capitalised,' the executive said.
'For us, it is business as usual.'
While insurance company AIA says it remains financially sound amid the current economic turmoil, some of its policyholders in Hong Kong are being spooked by fears parent company AIG could be the next financial firm to tumble
Number of AIA policyholders in Hong Kong: 1m+
Insurer's market share in Hong Kong: 16.2%
Total value of premiums managed: HK$21.5b
Number of agents employed: 8,500
Number of pension accounts administered: 0.6m