AIG FACING DIFFICULTIES WITH THE BAHRAINI

UNCLAS MANAMA 000099

SIPDIS

SENSITIVE

DEPT FOR EB/TPP/BTA, EB/IFD/OIA, AND NEA/ARP
DEPT PASS USTR:JBUNTIN AND CBLISS
COMMERCE FOR 4520/ITA/MAC/ONE/CLOUSTAUNAU

E.O. 12958: N/A
TAGS: ETRD EINV BEXP BA
SUBJECT: AIG FACING DIFFICULTIES WITH THE BAHRAINI
GOVERNMENT, BUT NOT NOW REQUESTING USG INTERVENTION


(U) This message contains SENSITIVE BUT UNCLASSIFIED
INFORMATION. Please protect accordingly. NOT FOR INTERNET
DISTRIBUTION.

1.(SBU) U.S. insurance giant American International Group
(AIG) is concerned that Bahrain's draft insurance law,
announced yesterday by the Bahrain Monetary Agency (BMA)
Governor, could seriously infringe its competitiveness in
Bahrain, local AIG Group Manager Ghalib Hammoudi told
POL/ECON Chief on January 20. Hammoudi said the law does not
authorize the existence of insurance agencies, only brokers
and companies. He stated that AIG has submitted to the BMA
suggested amendments to the draft law that would authorize
insurance agencies, but the BMA has not provided any feedback
to the message. AIG has operated successfully in Bahrain as
an agency since 1960, when ALICO issued the first insurance
policy on the island, Hammoudi proudly related.

2.(SBU) Hammoudi also briefed that in 2003, the BMA refused
to allow AIG to activate ALICO's property casualty license on
behalf of AIG daughter company American Insurance
Underwriters (AIU). Hammoudi said that when AIG protested
the BMA's decision, the BMA agreed to reconsider, but it has
yet to provide AIG with a response.

3.(SBU) AIG and the GOB have a previous dispute. In 2001,
the Government ordered ALICO to pay the 10% company social
insurance levy to GOSI, Bahrain's financially troubled social
insurance organization, for its commission insurance agents.
ALICO sued the government and initially won its case that
commission agents are independent businessmen, not employees.
However, the government substituted a different judge into
the court, and he reversed the previous ruling. At the time,
the Embassy offered to intervene, but local ALICO officials
never took up the offer. In May 2003, the company paid GOSI
USD 1 million to settle accounts, and it is currently paying
the social insurance levy for its agents.

4.(SBU) COMMENT: Embassy has requested a copy of the draft
insurance law to pass to U.S. FTA Financial Services
negotiators. While AIG has requested that we not raise its
specific problems in the context of FTA negotiations, there
may be enough here to address these issues on behalf of the
entire U.S. insurance industry. END COMMENT.
NEUMANN