Abstract
AIG’s failure in the subprime crisis carries significant implications for financial regulators, especially the Chinese regulators, who are deregulating the insurance sector and considering the development of a credit derivatives market in the country. Regulatory loopholes allowed AIG to stray away from its core business; notably into the credit default swaps (CDS) business that triggered its failure. Assetliability mismatch in AIG’s securities lending programme worsened its liquidity problem, turning it into a solvency problem. The moral of the story is that insurance companies must not be tempted to maximise short-term profit; risk control is of paramount importance to avoid an AIG fate.
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© 2009 Chi Lo
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Lo, C. (2009). What Can We Learn from AIG’s Collapse?. In: Asia and the Subprime Crisis. Palgrave Macmillan, London. https://doi.org/10.1057/9780230251137_7
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DOI: https://doi.org/10.1057/9780230251137_7
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-31435-5
Online ISBN: 978-0-230-25113-7
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)