I REFER to the letter "Safeguard insurance policies" (my paper, Sept 19) and news reports in my paper with regard
to the United States financial crisis.

The recent financial turmoil in the US has seen the collapse of Lehman Brothers, the acquisition of Merrill Lynch by Bank of America and the bailout of the American International Group (AIG).

These disasters have caused ripples in Asian stock markets. For example, policyholders of the American International Assurance (AIA), whose parent company is the American International Group (AIG), are worried about how the crisis would affect their insurance policies.

AIA has reassured its clients that it has sufficient capital and reserves to meet all policyholder obligations.

At the same time, the Monetary Authority of Singapore (MAS) said that the insurer has sufficient assets in its insurance funds to meet its liabilities.

Still, nervous policyholders continue to queue up at AIA?s office to terminate their policies.

This shows that policyholders are losing confidence and this can have a contagious effect on the local stock market.

To me, these sentiments could be a result of the following:

– So far, there are no published figures on the insurer's reserves and working capital, or concrete evidence to show that the reserves and capital are sufficient to meet all policyholder obligations. Without such information, policyholders will continue to queue up at the insurer's premises.

– Policyholders are wondering if the financial returns of their insurance policies on maturity date will be much lower because of the troubles that AIG faces.

Mr Teo Kueh Liang

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