Peter Zaffino, the Global Chief Operating Officer (COO) and Chief Executive Officer (CEO) of General Insurance at AIG, expects property and casualty (P&C) market dynamics to drive heightened discipline across the space in 2020.
Zaffino, alongside AIG President and CEO Brian Duperreault and Mark Lyons, Chief Financial Officer (CFO), recently discussed the re/insurer’s ongoing transformation as well as broader re/insurance sector conditions at a Goldman Sachs U.S. Financial Services Conference, held on December 10th.
Regarding the company’s performance in 2019 and expectations for next year, including its AIG 200 strategy, the executives underlined a desire to continue the momentum, begin the process of implementing its multi-year AIG 200 programme, and also successfully close the sale of Fortitude Re.
More comprehensive details on the above are expected during the firm’s February 2020 earnings call, explained management.
The discussion moved on to more industry-wide topics and Zaffino offered some thoughts on the state of the P&C market heading into 2020.
“I would say it’s going to continue to be disciplined,” he said. “You really have to look at it across the world and put it in as geographic components and then segment it. But, if I look at the area where I think it is going to have probably the most impact, it will be North America.
“And the implications are, if I go by product lines, with property you have three years in a row of cat activity. For the first time we’ve seen alternative capital, stated capital, is going to go down. I would add to that that there’ll be more of that stated capital that will be trapped in 1/1.
“So, that has dynamics on the retro market, has dynamics on the property reinsurance market, and we’ll see how that plays out January 1st, April 1st for Japan and June 1st for Florida. But I would expect that there’s going to be more discipline. They blinked a little bit last year, I don’t think you’ll see that as much this year.”
According to Zaffino, AIG has seen more meaningful rate improvement in financial lines, casualty lines, motor and property lines, and this is something he “expects to continue” next year.
In the current market landscape, Zaffino expects reinsurers to remain cautious and disciplined in terms of where they are going to deploy capital in both property and casualty business. He expects reinsurers to return to the better underwriters where they see the trajectory is going to be positive in the future.
“I think it’s just going to be a more disciplined market where when you have leadership characteristics, a global footprint and excellent underwriting characteristics on broad lines of business, you are able to solve problems for your clients,” said Zaffino.
