AIG - Securities Lending - Insurance Regulators

  • Eric Dinallo - New York
  • Vaughan - CEO NAIC / Iowa
  • Michael Mcraith - Illinois
    • Insurance and Systemic Risk - [PDF-181p, VIDEO-C-SPAN]
  • Doug Slape - Texas - AIG Lead Regulator
  • content.naic.org/sites/default/files/capital-markets-primer-securities-lending.pdf
    • While this insurer is most known for significant losses that occurred within its credit default swap (CDS) program,
      the onset of an overwhelming demand for returned cash by its securities lending counterparties compounded the
      insurer’s liquidity constraints.

2008 1010 - WSJ - AIG Increases Borrowings While Racing to Sell Assets, By Liam Pleven, Carrick Mollenkamp and Craig Karmin -  Oct. 10, 2008 - [link]

  • Securities Lending
  • 2009 0305 - GOV - Perspectives on Systemic Risk
  • As early as July 2006, we were engaged in discussions about the securities lending program with AIG.
  • In 2007, we began working with the company to start winding down the program.

2010 0526 - COP - Testimony - Michael Moriarty, Deputy Superintendent of the New York State Insurance Department - 7p

  • In December 2006, AIG’s lead state insurance regulator for the company’s domestic life insurers (“lead life insurance regulator”) began a routine examination of AIG in coordination with several other state regulators.19
  • During the examination, the state regulators identified issues related to the company’s securities lending program.
  • Prior to mid-2007, state regulators had not identified losses in the securities lending program, and the lead life insurance regulator had reviewed the program without major concerns.

2011 09 - GAO - Review of Federal Reserve System Financial Assistance to American International Group, Inc - 152p

2008 0721 - Circular Letter No. 16 (2008) - [link]

TO: All Authorized Insurers
RE: Securities Lending
STATUTORY REFERENCE: N.Y. Insurance Law §§ 201, 301, 1409 and 1411

It has come to the Department's attention that some insurers engaged in securities lending activity have experienced significant losses in the last six to twelve months.

  • Specifically, cash received as collateral was reinvested into securities whose value has significantly declined.

  • As we see increased volumes in securities lending activity, we are concerned that some insurers may not be maintaining adequate collateral and effectively managing the risks associated with the securities lending function.