Published: Friday September 26, 2008
The Jamaican subsidiary of American Home Assurance remains strong and solid, capable of meeting obligations to its clients, despite last week's near collapse of its ultimate parent, America's AIG, local managers say.
"We are regulated by the Financial Services Commission," Earl Codling, the head of the Jamaica operations, told the Financial Gleaner. "It is AIG that is in problems and not the insurance companies which have their own operations."
AIG (American Insurance Group) is one of the world's largest insurance operators, but last week it had to be rescued with a US$85 billion lifeline from the US central bank, the Federal Reserve. It was one of the US financial institutions caught up in the American sub-prime mortgage crisis, being an issuer and buyer of the murky instruments, credit default swaps (CDS), that turned toxic on Wall Street.
But on Monday Eric Dinallo, the superintendent of insurance for the state of New York, issued a statement assuring that the problem with AIG was largely with its non-insurance parent company, rather than its insurance subsidiaries, including the New York American Home Assurance Company, of which the Jamaica operation is a subsidiary.
"... Unlike the troubled parent company, the property and casualty insurance company New York regulates has significant more in assets over and above the reserves required to cover all valid current and future claims," Dinallo said.
No comment from fsc
Jamaica's Financial Services Commission (FSC), which regulates the island's insurance industry, has up to now declined to comment on American Home, whose premium income last year of $1.9 billion was nine per cent of the market.
However, Codling insisted that the local company's balance sheet remained similarly strong, capable of meeting its projected claims this year of $220 million, of which it has already paid out $23.1 million. It expects between $20 million to $30 million in claims from Hurricane Gustav which brushed the island late last month.
Last year, American Home's claims totalled $348.5 million, including reinsurance liabilities. The net pay-out to local operations was $91.3 million.
$3.8 billion assets
At the end of June, Codling reported, American Home had assets of $3.8 billion, up 11.7 per cent on the $3.4 billion with which it closed out 2007.
But as the company's assets climbed, the converse happened with liabilities. These declined from $3 billion at at the end of 2007, to $2.7 billion at mid-year - a 10 per cent drop.
Such performance helped underpin Codling's upbeat assessment of his company, a confidence shared by Orville Johnson, director general of the Insurance Association of Jamaica.
"American Home Assurance Group operates independently and has a sound portfolio of business," Johnson told the Financial Gleaner. "It is regulated here by the FSC who would ensure that solvency is maintained and the interests of the Jamaican policy holders are protected."
Source: Jamaica Gleaner