Despite the fact Hurricane Ian will impact an already hardening reinsurance market, Peter Zaffino, Chief Executive Officer (CEO) of global insurer AIG, said today that his firm has commitments from all of its major reinsurers that they’ll be able to deploy the same amount of capital to the extent AIG needs it for its property catastrophe business.
Speaking recently on an earnings call following the release of AIG’s third-quarter 2022 financial results, CEO Zaffino addressed reinsurance market conditions in light of the damage caused by Hurricane Ian.
“While Hurricane Ian will have an impact on the broader insurance, reinsurance and retro markets, we believe AIG is well positioned,” said Zaffino. “Very importantly, we have strong and strategic relationships with our major reinsurers, and we are confident in our ability to obtain similar levels of capacity for 2023 as we did in 2022.”
What will also be beneficial to the carrier as it embarks on its reinsurance procurement at 1/1 and beyond, is the fact it’s continued to improve and change its portfolio by lowering gross exposure, with Zaffino noting that the “reinsurance we require will reflect this in 2023.”
As explained by Zaffino, in 2022, AIG altered the structure of its reinsurance, acquiring global occurrence protection that sits above its per occurrence layers across the world, while reducing the aggregate limit.
“We see significant growth opportunities across the market, especially in the near-term and for property specifically, and our significant financial flexibility allows us to be nimble as we deploy capital at attractive risk-adjusted returns to retail property, wholesale property, Talbot, global specialties, and AIG Re,” he continued.
Prior to Hurricane Ian’s Florida landfall, reinsurance rate momentum was already expected to persist in 2023, notably in the property space and specifically property cat, and the extremely costly storm is poised to accelerate this trend, pushing rates up and resulting in a more challenging environment for buyers of protection.
When questioned further on the current reinsurance market landscape and what this means for AIG as a buyer of coverage, Zaffino emphasised that the company is not an index of the market.
“We are very different in terms of how we purchase reinsurance just based on the size and scale, geographic diversity, different products,” said Zaffino.
He went on to reiterate that AIG has “got commitments from all of our major reinsurers that they’ll be able to deploy the same amount of capital to the extent we need it, for our property cat.”
Commenting on the January reinsurance renewals more broadly, the CEO noted that no matter who you talk with, the truth is that “it’s going to be a very late renewal season.”
“Retro needs to be put together; nobody’s quoting now. There’s not going to be any firm order terms for quite some time. And I think we’re just going to have to work through the market. But I just don’t think that AIG is going to be in a detrimental position just based on our portfolio structure, partnerships, and actually our performance,” said Zaffino.
Of course, the firm is also a seller of reinsurance through AIG Re, and Zaffino was eager to praise the work of this team to reduce peak exposure, particularly in Florida, where limits deployed have fallen by around 60% since 2018.
These actions, he explained, meant that AIG Re’s catastrophe losses related to Hurricane Ian amounted to just $125 million, against an overall hit from the storm of $450 million.
“Considering Hurricane Ian and other cats in the third quarter, our cat losses validate the quality of our underwriting, our reinsurance strategy, and our ability to successfully manage volatility,” said Zaffino.
