Global insurer AIG was capable of “significantly improve” its property disaster construction and reinsurance protection offered on the key January 1st, 2024, reinsurance renewals, with Chief Executive Officer (CEO) Peter Zaffino describing the result as “tremendous” for the service.
He defined that AIG intentionally buys the vast majority of its reinsurance safety at January 1, because it permits the agency to “strategically optimise” the result throughout its placements, offering the agency “with clarity on our cost of reinsurance at the beginning of the year.”
Before delving into the specifics, Zaffino famous the dramatic adjustments within the international property market over the previous two years, which makes analysing AIG’s threat profile ever extra advanced. He then went on to elucidate AIG’s methodology in figuring out the danger adjusted change at its renewal, underlining the necessity to evaluate like for like.
When making use of this system, Zaffino stated that “AIG had a tremendous outcome with our reinsurance partners at the January 1 renewal season, building upon the very strong result achieved in a very challenging market in 2023.”
The headline, he continued, “is that we were able to significantly improve our property cat structure and reinsurance coverage provided.”
When in contrast with the earlier 12 months’s buy, together with for Validus Re, Zaffino defined that the general spend for 2024 has come down roughly $200 million, whereas AIG’s core property treaties, excluding Validus Re, have barely decrease ceded premium year-over-year.
Starting with the corporate’s property cat placements, the CEO revealed that the core industrial North America retention of $500 million remained unchanged for the second straight 12 months, whereas the attachment on the devoted Lexington prevalence tower was additionally unchanged at $300 million.
“In both cases, the modelled attachment point is lower, and the exhaust limit is higher,” stated Zaffino.
The worldwide property cat per-occurrence constructions renewed with a decreased retention in Japan to $250 million, which is a $50 million enchancment year-over-year, whereas the remainder of the world attachment was unchanged at $125 million.
“We were very pleased to have achieved broader coverage across all of our core occurrence towers. With nominal attachment points unchanged, or in the case of Japan decreasing, the modelled probability of attaching our cat reinsurance improved with respect to key perils and across every major territory, following the growth achieved in the property portfolio in 2023,” stated Zaffino.
AIG additionally renewed its property cat combination cowl at 1.1 2024, with Zaffino noting improved protection because the agency additional decreased volatility from frequency of loss.
“The aggregate now includes a standalone supplement dedicated to losses in North America arising from secondary perils. Importantly, it also now covers contributing losses from our high net worth portfolio. Our annual average deductible for North America is $825 million. The North America other perils deductible is $350 million, which is a new deductible. And Japan and the rest of the world deductibles are $200 million and $175 million, respectively. These are subject to each and every last deductibles of $20 million other than for North America wind an earthquake which are at $50 million. Our return period attaching point is lower year over year,” stated the CEO.
“For all of our major proportional treaties across a range of classes, we improved or maintain our ceding commission levels, reflecting our market leading underwriting expertise and position in the market,” he added.
In phrases of the agency’s casualty reinsurance renewal, Zaffino commented on among the challenges available in the market because of inflation, each social and financial, and in addition litigation funding within the US, which had been each focal factors for reinsurers on the renewals.
“For casualty at AIG, we remain very focused on our underwriting standards, and the positioning of the portfolio,” stated Zaffino. “Our team has done a terrific job of re-underwriting the entire business, particularly considering the amount of work that was needed to reposition it to where it is today.”
“As we outlined last quarter, we put a comprehensive reinsurance treaty in place starting 2018, that provides us with substantial amount of vertical protection. Our renewal of the casualty reinsurance protections allowed us to maintain the same net retained lines with no impact on ceding commissions, which is an outstanding outcome,” added Zaffino.
Summarising AIG’s expertise on the January 2024 renewals, Zaffino stated: “At January 1, our reinsurance partners maintained their significant support of AIG, with consistent capacity and improved reinsurance terms that demonstrate a clear recognition of the quality of our portfolio and our underwriting teams.”
