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Financial stability in the insurance sector: the case of the American International Group, AIG

Author

Listed:
  • Lyubov Klapkiv

    (UMCS - Maria Curie-Sklodowska University, CREG - Centre de recherche en économie de Grenoble - UGA - Université Grenoble Alpes)

  • Faruk Ülgen

    (CREG - Centre de recherche en économie de Grenoble - UGA - Université Grenoble Alpes)

Abstract

In the aftermath of the global financial crisis (GFC), attention was focused on the banking sector, as it was the most important source of instability in the financial market. During 2008–2012, the Federal Deposit Insurance Corporation (FDIC) closed 465 failed banks. The largest amount of the bailout (about USD $182 billion) was given from the US Federal government to the American International Group (AIG), one of the biggest insurance companies in the US insurance market. The insurance sector is usually considered as a less important player in the financial market (total assets held by European Union (EU) banks in 2019 were 49.3 trillion euros, and total assets of the EU insurance sector – 12.706 trillion euros) and strongly regulated. However, the case of AIG shows that the role of insurance companies in the generation and diffusion of instability is underestimated. We can also presume that the insurance sector remained under-regulated after the decade. The collapse of AIG was a combination of holes and breaches in the regulation mechanisms and a lack of appro priate law, which permitted the rise of some elements of fraud in the functioning of insurance markets.

Suggested Citation

  • Lyubov Klapkiv & Faruk Ülgen, 2023. "Financial stability in the insurance sector: the case of the American International Group, AIG," Post-Print hal-04477066, HAL.
    • Handle: RePEc:hal:journl:hal-04477066
    DOI: 10.4337/9781800377363.ch36
    as

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