Indian insurance regulator IRDA has reportedly asked Tata AIG to clarify its solvency.
A tight-lipped AIG (India) confirmed that its solvency had been questioned, but refused to answer additional questions. “Having regard to the developments reported in USA, the IRDA has asked for the reports of the companies in the matter,” a spokesperson said.
According to IRDA, the US economic downturn and recent collapse of several banks has caused serious concern in Indian financial markets. As the IT Examiner previously reported, giant US investment bank Lehman Brothers filed for Chapter 11 bankruptcy protection after desperate takeover talks failed. In addition, a distraught Merrill Lynch somehow managed to sell itself to the Bank of America for $50 billion.
AIG India shares are currently split between Tata and AIG, with the former holding 74 per cent and the latter retaining the remaining 26 per cent. It should be noted that a March 31 (2008) IRDA report determined that both companies had satisfactory solvency margins and were capable of covering liabilities.
Industry sources confirm that AIG's solvency was almost certainly assured. A leading insurance company official told the Times of India that while the American AIG had liquidity concerns, there was no solvency issue in India “due to [stringent] IRDA regulations”.
Nevertheless, Indian policy holders will be relieved to learn that the Federal Reserve Board has agreed to lend as much as $85 billion to rescue the floundering American International Group.
Source: IT Examiner