Insurance industry still in turmoil after economic recession
The controversies surrounding the U.S. insurance industry and its relation to the 2008 economic recession continue to prove to be an active battlefield. This week, AIG, one of the country’s largest insurance companies, has announced that it may pursue a lawsuit against Bank of America’s Countrywide insurance unit. The lawsuit accuses Countrywide of playing a role in the financial disaster. AIG was cleared to pursue this lawsuit after U.S. District Judge Mariana Pfaelzer approved of such action this week in Los Angeles, California.
AIG takes aim at Countrywide
The lawsuit claims that Countrywide is liable for billions of dollars worth of losses through fraud inducing practices. The company allegedly purchased risky residential mortgage-backed securities that AIG claims helped sparked the country’s financial crisis. The lawsuit is part of ongoing litigation between AIG and Bank of America that first began in 2011. This litigation involves Bank of America’s alleged role in the economic recession that took flight in 2008. According to AIG, the bank’s dubious practices caused a strong disturbance in the insurance industry and these practices are partially responsible for AIG’s bailout by the federal government.
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Industry continues to shift due to turbulent economy
The insurance industry is often cited as one of the main instigators of the economic recession. The insurance industry has, however, suffered in the wake of the recession as other areas of business have. The recession caused many of the companies in the insurance industry to re-evaluate their business practices, forcing some to make drastic changes in order to avoid financial ruin. AIG was not as fortunate as other insurers in this regard and was the notorious recipient of a federal bailout. Though the insurer has managed to recover from its financial disaster, AIG is still eager to recoup the losses it had seen during the recession.
Countrywide fighting legal battles on many fronts
This is not the only legal matter that Countrywide is currently tangled in. Last month, the insurer announced its intent to settle a legal case with its investors. This matter is also being overseen by District Judge Pfaelzer, who has not yet granted approval for the settlement. It is unlikely for the drama in the insurance industry to die down any time soon, especially as insurers continue to look for ways to recover from the economic recession.