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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Dr. Voodoo who wrote (39873)	9/14/2008 3:59:16 AM
From: TobagoJack	Respond to of 218068

:0) i think i understand what you are predicting. in the meaner and nastier time, the greatest show in the universe the original big bang is about to unfold ... just in in-tray RE AIG: I do not think people understand the issues around a potential AIG failure. It is not like a collapse of Lehman, which could be contained within the financial markets. As one of the largest insurers/reinsurers, any significant impairment of AIG's Balance Sheet could cause the insurance rating agencies to significantly downgrade the ratings of AIG policies. Such a downgrade might lead to companies breaching their contractual obligations to maintain general liability (G/L) insurance of a certain rating or higher. This in turn might lead the other party to withhold monies owed until the company that breached its insurance obligations could obtain a new policy with the required or higher rating. In addition, the breaching party might be prohibited from doing any further work until its insurance problem was cured. At the same time such a potential breach might lead banks to declare borrowers to be in breach of their loan covenants. The banks might then call in their loans. Since AIG is one of the largest issuers/reinsurers in the world, any failure by it could lead to a cascading waterfall effect on Main Street businesses around the world. While I am sure Warren Buffett would welcome the new business, I doubt whether there is sufficient capacity within the whole insurance industry to pick up AIG's "book" of business.