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AIG expects up to $1.7 billion of third-quarter catastrophe losses

19th October 2018 - Author: Steve Evans

Global insurance and reinsurance firm American International Group (AIG) has pre-announced that it expects to suffer between $1.5 billion and $1.7 billion of catastrophe losses from third-quarter events.

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The Q3 loss total will have caused AIG to call on some of its reinsurance partners for support.

As we explained recently AIG was only a couple of hundred million dollars of qualifying severe losses away before its U.S. aggregate catastrophe reinsurance coverage would be triggered. However, it seems the firm still has a little retention left before that protection kicks in for it this year.

AIG said that multiple loss events in Japan, including typhoon Jebi and typhoon Trami, as well as losses caused by Hurricane Florence and revisions to its loss estimates for the California mudslides all contributed to the Q3 bill.

AIG has individual catastrophe reinsurance covers for Japan and other territories so has likely been able to claim some of the gross loss back from its reinsurance partners in that region of the world.

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The firm said that it expects pre-tax catastrophe losses, after reinsurance, from the multiple losses across Japan and Asia to be amount to between $900 million to $1 billion. While pre-tax catastrophe losses, net of reinsurance, from U.S. loss events are expected to cost the firm $600 to $700 million.

Additionally, AIG estimates that its exposure to hurricane Michael, a fourth-quarter event, will be a loss pre-tax and after reinsurance of around $300 to $500 million.

The insurer confirmed that it believes it has exhausted roughly $700 million of the $750 million retention sitting underneath its North America aggregate catastrophe reinsurance program thanks to the impacts of the California mudslides, Hurricane Florence and if its Hurricane Michael losses come out at the higher end of the range.

Brian Duperreault, President and Chief Executive Officer, commented, “Our thoughts are with those who have been affected by the recent extreme events. Across AIG we are committed to supporting our customers, wherever they are around the world, by acting quickly to help them recover and rebuild. We are pleased that our efforts to restructure our North American reinsurance portfolio are yielding the desired result to mitigate our exposure to catastrophe losses. We continue to look for ways to further evolve our global protection measures while remaining diligently focused on executing against our plan to position AIG for long-term sustainable, profitable growth.”

AIG’s estimates for Q3 losses include losses to the Validus reinsurance and retrocession book as well as its primary operations.

Analysts said that AIG’s loss estimates are much higher than they had anticipated and it’s assumed that typhoon Jebi will have driven a significant proportion of the bill given it’s now clear it was the largest loss event of the quarter.

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