Tuesday, September 16, 2008

AIA Singapore

AIA Singapore Policy Owners Panic

The troubles of US parent AIG has spooked AIA Singapore policy holders into prematurely terminating their insurance policies. Some had to wait close to four hours before being attended by AIA counter staff yesterday. Wise move or panic driven?

AIA Policyholders PanicWhy do it now when returns for the policies are likely to be poor considering the dismal performances of the stock markets? Will the bankruptcy of AIG lead to the AIA Singapore policy holders holding worthless pieces of paper?

Not quite, says the Monetary Authority of Singapore (MAS). According to MAS, AIA Singapore has sufficient funds kept in a separate account to meet all policy holders' liabilities as required by law. MAS further added that it will continue to closely monitor developments in AIA. If necessary, MAS will activate the Policyholder's Guarantee Fund (a fund contributed by all insurance companies in Singapore) which can cover close to 90% of this insurance company's liability to policy holders.

Tan Kin Lian, former CEO of NTUC Income (including it's insurance arm)- the largest insurer in Singapore) appeared on Channel News Asia on 16 September 2008 and had this advice for AIA Policy Holders:

Is your money safe with AIA ?
"Several AIA policyholders have asked my advice. They are worried that AIA may be affected by the collapse of AIG. They asked if they should surrender their AIA policy now and receive the surrender value now.

My advice is:

  • AIA has a separate policyholder's fund covering its liability to its policyholders in Singapore.
  • To my knowledge, this fund is solvent and is not affected by the problem faced by AIG
  • There is no need to panic and surrender the AIA policies at this time
  • Even if this fund is in trouble, there is a Policyholder's Guarantee Fund managed by MAS that can take care of most of the liability (maybe 90% or more).
  • It is better to wait for any official announcement from MAS

I hope that my comments are correct and can help to allay the fears of AIA policyholders."

Tan Kin Lian repeats this in his blog: http://tankinlian.blogspot.com/

This panic in a financial institution in Singapore has not been seen since Singapore-based Nick Leeson's unauthorized bets on the Nikkei futures caused the Collapse of the oldest merchant bank in London, the Barings Bank. As former US Federal Reserve Chairman, Alan Greenspan said, "This is a once-in-a-century financial crisis".

This is certainly a development worth keeping track of though I am not surprised with the failure of so many financial institutions in the USA. As they say stateside: "It's been a long time coming".

While those with Whole Life and Endowment Policies are protected by the MAS Policyholder's Guarantee Fund, the same cannot be said for those with Unit Link Investment Funds. These Unit Linked funds operate much like unit trusts. If the company fail, all the money could be lost.

Luckily, Singapore financial institutions have been made wiser and stronger because of the 1997 Asian Financial Crisis and this will help us ride through the financial tsunami coming from the West. Stay calm and get ready to benefit from the opportunity of a lifetime! But don't expect a quick fix.

© http://comsg.blogspot.com -AIA Singapore

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