Monday, September 15, 2008

Subsidiary Shenanigans

When mega-insurance companies want a rate increase, they invariably pretend that their wholly-owned subsidiaries are entirely independent companies and state regulators shouldn't be allowed to look at the parent corporation's books. On the other hand, when the parent is desperate for money to stop its stock price from free-falling, guess where it finds it? You guessd it!

It only looks like A.I.G. is borrowing from itself. In fact, what it is doing -- just days after the 9-11 anniversary and two tropical storms whose destruction reached almost as far north as the city -- is reducing the cash reserves New York's state insurance regulators originally considered would be necessary in the event of a natural or man-made disaster.

Insurance company going broke under the regulatory rules? Simple solution: change the rules! Only the insurance company's customers will be at risk.

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