Costa Rica´s state insurance monopoly sought yesterday to calm clients worried about the fate of insurance giant American International Group (AIG), which reinsures 22 policies here and narrowly avoided bankruptcy this week.
“We want to tell all Costa Ricans, and especially our clients, not to worry,” said Guillermo Constenla, president of the National Insurance Institute (INS). “The institute is financially and technically sound.”
The 22 policies, which range from fire insurance to worker compensation, belong to multinational companies and state entities, including Juan Santamaría International Airport in Alajuela, west of San José. If disaster struck every client at once, the total cost would be $940 million, with AIG bearing most of the burden, Constenla said.
The U.S. Federal Reserve´s $85 billion takeover of AIG Tuesday calmed nerves at INS and persuaded the institute to stick with AIG, which reinsures less than 1 percent of INS policies, Constenla said. Still, if AIG´s credit rating drops further, he said, INS will switch the policies to another reinsurance agency.
“We have to remain alert,” he said. “If the rating goes down, we´ll start to worry. Then the red light goes on.”
AIG´s troubles come amid a worsening global credit crisis that has led the investment bank Lehman Brothers to file for bankruptcy protection and the brokerage firm Merrill Lynch to seek takeover by Bank of America. Yesterday, as bank lending came to a near halt, the Federal Reserve (Fed) and the world´s other major central banks pumped $180 billion into money markets overseas, according to wire reports.
Top U.S. congressional leaders were meeting late Thursday with the Fed to come up with a possible major U.S. government bailout, possibly similar to that in the late 1980s when the savings-and-loan failure threatened the stock markets.
See today´s top business story C.R. Dodging the Crisis at http://ticotimes.net/business.htm for more on this story.