Repercussions: the impact of the AIG crisis on its insurance subsidiaries

Numerous studies have shown that insurance companies can be adversely affected by problems at a parent company or an affiliate – indeed, over the years, affiliate-related problems have been severe enough to cause the insolvency of many insurance companies. This paper provides a case study of affiliate risk, based on the experience of insurance companies that were part of the American International Group, Inc (AIG) during the global financial crisis of 2007/08. This case study raises many questions about the effectiveness of risk management and prudential supervision of large, complex, financial conglomerates.