AIG 2015 Annual Report Download - page 41

ITEM 1A / RISK FACTORS
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Our status as a nonbank systemically important financial institution, as well as the enactment of Dodd-Frank, will
subject us to substantial additional federal regulation, which may materially and adversely affect our businesses,
results of operations and cash flows. On July 21, 2010, Dodd-Frank, which effects comprehensive changes to the
regulation of financial services in the United States, was signed into law. Dodd-Frank directs existing and newly created
government agencies and bodies to promulgate regulations implementing the law, an ongoing process anticipated to continue
over the next few years.
We cannot predict the requirements of the regulations ultimately adopted, the level and magnitude of supervision we may
become subject to, or how Dodd-Frank and such regulations will affect the financial markets generally or our businesses,
results of operations or cash flows. It is possible that the regulations adopted under Dodd-Frank and our regulation by the FRB
as a nonbank SIFI could significantly alter our business practices, limit our ability to engage in capital or liability management,
require us to raise additional capital, and impose burdensome and costly requirements and additional costs. Some of the
regulations may also affect the perceptions of regulators, customers, counterparties, creditors or investors about our financial
strength and could potentially affect our financing costs.
See Item 1. Business – Regulation for further discussion of the details of the aforementioned regulations to which AIG and its
businesses are subject.
Actions by foreign governments and regulators could subject us to substantial additional regulation. We cannot
predict the impact laws and regulations adopted in foreign jurisdictions may have on the financial markets generally or our
businesses, results of operations or cash flows. It is possible such laws and regulations, the impact of our designation as a
global systemically important insurer (G-SII), our status as an Internationally Active Insurance Group (IAIG) and certain
initiatives by the FSB and the IAIS, including, but not limited to, the application of HLA capital and the ongoing development of
an ICS, and implementation of Solvency II in the European Union, may significantly alter our business practices, limit our ability
to engage in capital or liability management, require us to raise additional capital, and impose burdensome requirements and
additional costs. It is possible that the laws and regulations adopted in foreign jurisdictions will differ from one another, and
that they could be inconsistent with the laws and regulations of other jurisdictions including the United States.
For further details on these international regulations and their potential impact on AIG and its businesses, see Item 1. Business
– Regulation—Other Regulatory Developments.
The USA PATRIOT Act, the Office of Foreign Assets Control and similar laws that apply to us may expose us to
significant penalties. The operations of our subsidiaries are subject to laws and regulations, including, in some cases, the
USA PATRIOT Act of 2001, which require companies to know certain information about their clients and to monitor their
transactions for suspicious activities. Also, the Department of the Treasury’s Office of Foreign Assets Control administers
regulations requiring U.S. persons to refrain from doing business, or allowing their clients to do business through them, with
certain organizations or individuals on a prohibited list maintained by the U.S. government or with certain countries. The United
Kingdom, the European Union and other jurisdictions maintain similar laws and regulations. Although we have instituted
compliance programs to address these requirements, there are inherent risks in global transactions.
Attempts to efficiently manage the impact of Regulation XXX and Actuarial Guideline AXXX may fail in whole or in part
resulting in an adverse effect on our financial condition and results of operations. The NAIC Model Regulation
“Valuation of Life Insurance Policies” (Regulation XXX) requires insurers to establish additional statutory reserves for term life
insurance policies with long-term premium guarantees and universal life policies with secondary guarantees. In addition, NAIC
Actuarial Guideline 38 (AG 38, also referred to as Guideline AXXX) clarifies the application of Regulation XXX as to certain
universal life insurance policies with secondary guarantees.
Our domestic Life Insurance Companies manage the capital impact of statutory reserve requirements under Regulation XXX
and Guideline AXXX through affiliated reinsurance transactions, to maintain their ability to offer competitive pricing and
successfully market such products. See Note 18 to the Consolidated Financial Statements for additional information on
statutory reserving requirements under Regulation XXX and Guideline AXXX and our use of affiliated reinsurance. The NAIC
and other state and federal regulators continue to focus on life insurers’ affiliated reinsurance transactions used to satisfy
certain reserve requirements or to manage the capital impact of certain statutory reserve requirements, particularly
transactions using captive insurance companies or special purpose vehicles. While our domestic Life Insurance Companies do