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SINGAPORE : The Monetary Authority of Singapore (MAS) has urged AIA policyholders not to act hastily to terminate their insurance policies, as queues formed outside AIA's offices on Tuesday, with some clients seeking to end their policies.
AIA is a subsidiary of New York-based American International Group (AIG) - one of the world's largest insurers - which has been hit by the financial meltdown. Some Singaporeans are concerned that AIG could be the next financial giant to fall after Lehman Brothers.
With regards to AIG, MAS said: "The value of these assets is not linked to AIA's or AIG's financial condition, but like all investments, their value may be affected by general market conditions."
The MAS assured the public that "AIA currently has sufficient assets in its insurance funds to meet its liabilities to policyholders".
It advised policyholders not to act hastily to terminate their insurance policies as they may suffer losses from the premature termination and lose insurance protection.
MAS explained that there are regulatory requirements, ensuring that all insurance companies maintain statutory insurance funds, including an investment-linked fund. This fund is segregated from its head office and other shareholders' funds.
Within these funds, insurance companies must maintain sufficient assets to meet all its liabilities to policyholders, which include participating policies and investment-linked policies.
MAS monitors the situation closely, and requires insurance companies in Singapore to manage their investment risks carefully.
The MAS will continue to monitor the financial health of AIA. It added that a Policy Owners Protection Fund could also be set up, if necessary.
Meanwhile, many policyholders waited outside AIA's office to find out if AIA will be among those that will be hit by the credit crisis in the US. A queue started since morning and some had to wait for up to four hours.
A few long-term AIA policyholders told Channel NewsAsia that they wanted to surrender their policies, despite incurring losses for premature termination.
One of them, 51-year-old Morgan Krishnan, is not taking any chances. He has decided to terminate three life insurance policies - for himself and his two sons.
He said: "I have been monitoring this for a few years, and I am giving up right now... I will make some returns, I will not make any loss."
Meanwhile, another policyholder said: "I just want to cash out the policy, and I have no intention of putting my money here anymore."
Yet another said: "I contemplated surrendering it a few years ago, so I guess it's about time."
And another noted: "AIG was mentioned in those reports, so we just wanted to make sure that whatever we have is going to be safe."
However, some policy holders are optimistic and confident that the MAS has the situation under control.
AIA has about two million policies which are in force in Singapore. In a statement, AIA said it maintains separate insurance funds for all policies issued by its Singapore arm.
Despite the short-term liquidity pressures, it assured that the company has sufficient capital to meet its obligations to policyholders. - CNA/ms
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