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High Q3 losses could see AIG call on aggregate reinsurance cover: Analysts

5th October 2018 - Author: Charlie Wood

Global insurer American International Group (AIG) has roughly $125 million of net potential H218 qualifying severe losses before its aggregate reinsurance coverage is triggered, according to data from investment banking firm Keefe, Bruyette & Woods (KBW).

AIG LogoOf the firm’s $428 million H118 severe losses, $290 million counts towards its loss aggregate cover’s $415 million attachment point, notes KBW in a recent note.

However, the firm’s aggregate severe loss reinsurance contract does not cover all of its severe losses, or indeed any Validus’ losses – which AIG recently acquired for $5.56 billion.

Furthermore, severe losses will probably be a smaller component of legacy AIG’s core Q318 loss ratio, and an even smaller component of its 4Q18 core loss ratio than was the case in H118, says KBW.

KBW maintains a cautious stance on AIG’s Q318 catastrophe losses, reflecting numerous events including U.S and Japanese floods, California wildfires, Colorado hailstorms, hurricane Florence, and typhoon Jebi.

The firm expects most of these losses to be borne by primary insurers rather than reinsurers, implying more exposure on the legacy AIG than the legacy Validus side. KBW projects total catastrophe losses of $545 million, implying a 7.5% catastrophe loss ratio.

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