AIG-UGANDA

Ugandans who are insured with AIG Uganda are worried that the insurance firm may close and hence they lose their insurance cover in view of the turbulent times the parent firm, America International Group in the USA is undergoing. "I paid comprehensive insurance for my kikumi (Toyota Corolla 100), and am not sure whether it is safe,” Hebert an IT expert in town told Red Pepper. Comprehensive insurance is about 4.5% the worth of a car. The US Federal Reserve this week announced an $85bn (Shs140 trillion) rescue package for AIG, the country's biggest insurance company, to save it from bankruptcy. AIG will get an $85bn loan, in return for an 80% public stake in the firm. The rescue follows the collapse of US investment giant Lehman Brothers, which caused share prices to plummet across the world's financial markets. Authorities are hoping the bail-out will avert the threat of a global financial meltdown. Analysts said the demise of AIG - which has policy holders in more than 100 countries and insures deals and investments across the globe - would have had a far greater impact on financial markets than other struggling US institutions like Lehman's collapse. However, talking from South Africa, where he had gone for a business trip, AIG Uganda Managing Director, Alex Wanjohi, was optimistic that Uganda would not suffer similar troubles. "AIG Uganda is locally capitalised, hence there is no need for our customers to worry," Wanjohi, who returns today, said in a telephone interview, "We have the capacity to weather the storm." However, a market analyst said if the main holding company faces financial collapse, there is always a trickle down effect felt by the subsidiaries. "AIG is the biggest insurer in Uganda because it has enjoyed a strong brand worldwide, hence Ugandans trust it. But if AIG, USA is troubled, the effects will be faced here too," he warned. The insurer sector contributed just about Shs120bn to the GDP last year having contributed Shs100bn the previous year. AIG contributed at least 20% in 2006/07 to the total. Global Effects If the company were to fail, many banks and investment funds around the world would lose their insurance cover at a time when defaults on payments are likely to increase. The Governor of New York, David Paterson, said AIG had so many business interests it would be hard to predict how widespread its bankruptcy would have been felt. "Its tentacles go further in to the avenues of business, mortgages, credit, hedge funds, as in countless ways that affect consumers, that affect drivers, homeowners, passengers," he said. AIG had posted losses in each of the last nine months. It was badly affected by the collapse of the US housing market, owing to the underwriting payments it was forced to make when customers defaulted on their loans. It offers individual and business products like Accident and Health Insurance, Motor Insurance, Travel Insurance, retirement services, worldwide claims, Business Property Coverage, Crisis Management, Employers Liability, Management Liability, Aviation and marine packages, commercial Property, Employee Benefits, Energy, Excess Casualty, Financial Lines, Investment and Financial Services, Oil and Petrochemicals and Political Risk. Others include Primary Casualty, Product Liability, Professional Liability, Retirement Services, Risk Finance Solutions, Risk Management Services, Surety, Terrorism and Crisis Management Coverage, Trade Credit, Travel Insurance, Warranty and Indemnity, Financial Services and Environmental Coverage.