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AIG brings down aggregate reinsurance limit to $2.05bn for 2021

22nd February 2021 - Author: Luke Gallin

Global insurer and reinsurer AIG has renewed its worldwide property catastrophe reinsurance program for 2021, securing a reduced $2.05 billion of aggregate limit that is shared across regional towers.

AIG LogoIn comparison, the firm’s 2020 property cat reinsurance renewal included $2.5 billion of aggregate limit shared across regional towers of the program, reflecting an 18% year-on-year decline in aggregate limit for 2021.

For the latest renewal, AIG’s North America coverage includes $1.275 billion of per-occurrence protection covering its U.S. and Caribbean personal lines business, with varying attachment points in specific geographies ranging from $50 million to $150 million.

In 2020, this layer of coverage included $1.525 billion of per-occurrence protection covering the firm’s U.S. and Caribbean high-net worth personal lines business, again with varying attachment points in specific geographies ranging from $50 million to $150 million.

The coverage for North America also includes per-occurrence reinsurance protection of up to $1 billion excess of $200 million (or excess $500 million for Southeast U.S. and Gulf States named storm losses), primarily covering commercial exposures but also personal lines not covered by the aforementioned personal lines coverage.

Here, AIG’s retention has reduced to $200 million from the $500 million retention included in the 2020 program.

The final piece of the North America coverage includes aggregate protection utilising the $2.05 billion of shared limit attaching excess of $500 million, with per-occurrence deductibles of $25 million, $50 million or $75 million, depending on region / event, primarily covering commercial exposures.

In 2020, aggregate protection utilising $2.5 billion of shared limit attaching excess of $750 million was leveraged by AIG.

For exposures outside of North America, AIG explains that coverage remains unchanged in Japan, with per-occurrence protection of $550 million excess of $200 million and which includes personal and commercial lines exposure.

Rest of World per-occurrence protection also remains the same as last year with coverage of $300 million excess of $100 million, also including both personal and commercial exposure.

The Rest of World and Japan $2.05 billion ($2.5bn in 2020) of aggregate shared limit attaches excess of $160 million and $250 million, respectively, with per-occurrence deductibles of $20 million.

“Although the shared limit coverage for North America, Japan and Rest of World has varying retentions per region, the maximum aggregate retention globally, after the impact of the per occurrence deductibles, is $750 million for 2021.

“We have also purchased property per risk covers that provide protection against large losses globally, which include those emanating from non-critical catastrophe events (all events except for named windstorm and earthquake) globally as well as critical catastrophe events (named windstorm and earthquake) outside North America,” says the firm.

AIG has also provided an update on Validus Re, noting that catastrophe protection here comes from a range of reinsurance but is largely providing $475 million of limit excess a $300 million retention from world-wide exposure through an aggregate excess of loss cover, with an additional $450 million of limit excess $700 million via the Tailwind Re Ltd. (Series 2017-1) catastrophe bond transaction.

So, there’s also more retrocession coverage at Validus Re this year, with reinsurance for 2021 providing an additional $75 million of limit when compared with last year’s program, while the retention and catastrophe bond protection remaining unchanged.

In recent years, AIG has been restructuring the use of its reinsurance protection and during the firm’s Q4 and full-year 2020 earnings call, incoming Chief Executive Officer (CEO), Peter Zaffino, praised his firm for its 1/1 reinsurance renewal activity during a challenging environment.

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