ID :
19991
Wed, 09/17/2008 - 14:54
Auther :
Shortlink :
https://www.oananews.org//node/19991
The shortlink copeid
No problems protecting local AIG policyholders: watchdog
(ATTN: UPDATES with local brokerage houses' exposure to Lehman from para 7) SEOUL, Sept. 17 (Yonhap) -- South Korea's financial watchdog said Wednesday there would be no problems protecting local policyholders of the Korean unit of American International Group Inc. (AIG), shrugging off concerns about a possible liquidity crisis.
AIG, once the world's largest insurer by market value, has been struggling to
raise capital, sparking concerns the insurer may be the next victim of the U.S.
subprime mortgage rout following the collapse of U.S. investment bank Lehman
Brothers Holdings Inc.
But the U.S. Federal Reserve announced on Tuesday (local time) it will provide
US$85 billion in emergency loans to AIG, soothing investor fears of a global
credit crunch.
"Policyholders' request for nullifying insurance contracts sold by AIG shot up
while canceled policies almost tripled to 600 yesterday," Kang Young-goo,
assistant governor at the Financial Supervisory Service (FSS), told reporters.
"The Fed's plans to provide an emergency loan are expected to ease woes about a
liquidity crisis."
According to AIG, the solvency margin ratio is an important indicator that helps
to judge whether an insurer is strong enough to pay claims to policy holders as
scheduled. The base ratio is 100 percent in South Korea.
"The Korean operations of AIG have secured sufficient liquidity and hold enough
local assets to cover possible liabilities," Kang said, adding that in the worst
case scenario, even if U.S.-based AIG faces troubles in its home operations,
there will be no problem in protecting policyholders in South Korea.
Meanwhile, a total of 11 local securities companies invested 105.5 billion won
($93.6 million) in equity linked securities (ELS) related to Lehman as of
September 12, according to the FSS.
ELS are structured investments that provide partial protection against downside
market risks while giving investors guaranteed returns in accordance with the
performance of the benchmark stock index.
"Even if their total exposure is to be written off as losses, the impact would be
limited on the financial health of local brokerage houses," said Song Kyung-chul,
deputy governor of the FSS, adding that possible losses account for a mere 0.8
percent of their equity capital.
The regulatory Financial Services Commission (FSC) said Monday that local
financial firms had invested $390 million in equity-related derivatives issued by
Lehman as of the end of June.
"Since June, local securities companies have reduced their exposure to Lehman,"
Song said, explaining the gap between the two data.
sooyeon@yna.co.kr
AIG, once the world's largest insurer by market value, has been struggling to
raise capital, sparking concerns the insurer may be the next victim of the U.S.
subprime mortgage rout following the collapse of U.S. investment bank Lehman
Brothers Holdings Inc.
But the U.S. Federal Reserve announced on Tuesday (local time) it will provide
US$85 billion in emergency loans to AIG, soothing investor fears of a global
credit crunch.
"Policyholders' request for nullifying insurance contracts sold by AIG shot up
while canceled policies almost tripled to 600 yesterday," Kang Young-goo,
assistant governor at the Financial Supervisory Service (FSS), told reporters.
"The Fed's plans to provide an emergency loan are expected to ease woes about a
liquidity crisis."
According to AIG, the solvency margin ratio is an important indicator that helps
to judge whether an insurer is strong enough to pay claims to policy holders as
scheduled. The base ratio is 100 percent in South Korea.
"The Korean operations of AIG have secured sufficient liquidity and hold enough
local assets to cover possible liabilities," Kang said, adding that in the worst
case scenario, even if U.S.-based AIG faces troubles in its home operations,
there will be no problem in protecting policyholders in South Korea.
Meanwhile, a total of 11 local securities companies invested 105.5 billion won
($93.6 million) in equity linked securities (ELS) related to Lehman as of
September 12, according to the FSS.
ELS are structured investments that provide partial protection against downside
market risks while giving investors guaranteed returns in accordance with the
performance of the benchmark stock index.
"Even if their total exposure is to be written off as losses, the impact would be
limited on the financial health of local brokerage houses," said Song Kyung-chul,
deputy governor of the FSS, adding that possible losses account for a mere 0.8
percent of their equity capital.
The regulatory Financial Services Commission (FSC) said Monday that local
financial firms had invested $390 million in equity-related derivatives issued by
Lehman as of the end of June.
"Since June, local securities companies have reduced their exposure to Lehman,"
Song said, explaining the gap between the two data.
sooyeon@yna.co.kr
