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Brokers hear from worried AIG clients

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NEW YORK—Insurance brokers said Tuesday that they have been fielding calls from concerned commercial clients regarding the tenuous situation at American International Group Inc.

Since the near collapse of the insurance giant last September and subsequent government bailout efforts, clients have been actively looking to diversify their insurer relationships away from AIG where that has been commercially viable, brokers say.

But Monday's news that the insurer is expected to report a roughly $60 billion loss next week and is in discussions with the government to secure additional funds to keep operating "has people shaking their heads, trying to figure out what's the end game for this?" said Eric Andersen, New York-based chief executive officer of Aon Risk Services' U.S. retail business.

"People intellectually understand that (AIG's) insurance companies remain solvent and have retained their ratings," Mr. Andersen said. What clients are trying to determine, he said, is, "What is everybody else doing" in the marketplace?

Clients also want to know about whether AIG is going to keep its ratings, he said.

CNBC reported Monday that a $60 billion loss would likely result in downgrades in AIG's insurance and credit ratings, forcing the New York-based company to raise more collateral.

Cindy Robinett, a partner with Seacrest Partners Inc. in Savannah, Ga., said the broker is seeing "somewhat of a mixed reaction" from clients about the situation.

"Obviously clients are concerned, and we're keeping them informed as we get information. In some cases clients are still taking a wait-and-see attitude, and in other cases, clients are wanting us to explore options for them."

"In the event of an unacceptable downgrade by a ratings agency, we want to be prepared to move swiftly on our client's behalf," she said.

Neil C. Krauter, chairman and CEO of broker The Krauter Group in New York, said clients are losing patience with the troubled insurer.

"Even though they understand the backstops of the assets held at the state level and all the inherent protections that exist regarding the inability of insurance companies to file bankruptcy vs. be taken into rehab by state regulators, clients are reaching a point of intolerance," Mr. Krauter said.