AIG achieved “significant” reinsurance improvements at 1/1 renewal: Zaffino

At the key January 2022 reinsurance renewals, American International Group (AIG) renewed more than $12 billion of limit across numerous treaties and CEO Peter Zaffino said the company achieved significant improvements to its protection, while also modestly reducing spend.

AIG has been going through quite the restructuring process in recent years, as it has restructured its books of business and adjusted its reinsurance protection to suit.

The giant insurer appears to have been rewarded for this at the 1/1 2022 renewal season, with CEO Peter Zaffino saying today that  “we were very pleased with the outcome of our reinsurance placements.”

Speaking during an earnings call held this morning US time, Zaffino said that he felt AIG was well-received in the market this year.

“While the markets presented significant challenges across the industry, with retrocessional limited along with other capacity issues, our reinsurance partners recognised the strength of our improved underwriting portfolio and reduced aggregation exposure, which translated to many improvements in our reinsurance structures, along with better terms and conditions,” Zaffino said.

Highlighting the scale of AIG’s activities at the January reinsurance renewals, Zaffino pointed out that, “We placed over 35 treaties at 1/1, with over 65 discrete layers, and over 12 billion of limit placed and we cede over $3 billion of premium in the market.”

Going on to say that, “The very strong relationships with our reinsurance partners and support we receive in the marketplace, is evident in the quality of the overall reinsurance program.

“We continued to make meaningful improvements to our core placements in every major treaty on January 1, and as a result, continued to reduce volatility in our portfolio.”

Reducing volatility has been the main goal, after a few years where AIG’s results have been patchy at best, with significant impacts from natural catastrophe and severe weather losses.

On the property catastrophe reinsurance side, which is where the insurance-linked securities (ILS) fund market plays its largest role, of course, Zaffino noted that improvements were made on both the per-occurrence and aggregate sides, at 1/1 2022.

“For the North America per-occurrence property cat treaty, we lowered our attachment points $250 million for all perils, which is a reduction from our core 2021 program that had staggered attachment points depending on peril, that ranged from $200 million to $500 million, and we maintained our per-occurrence attachment points International, which are $200 million for Japan and $100 million for the rest of the world,” he explained.

Perhaps more impressively and especially so after recent years of heavy cat losses, AIG also improved the terms on its aggregate reinsurance at the renewals.

“For our global shared limit aggregate recover, we were able to reduce our attachment point in every region across the world, most notably $100 million reduction in the attachment point in North America,” Zaffino said.

Adding that, “For our global shared limit, each and every deductible remain the same, or reduced in every global region, most notably a $25 million reduction in North American named storms.

“Our attachment point return periods are the same or lower in every region across the world, when compared to our 2021 core reinsurance program and our exhaustion period returns are higher in every instance across the world, on an OEP and AEP basis.”

That’s quite a result, in a hardening reinsurance market. But most notable is the fact that AIG feels it has further lowered its volatility and is better protected, while spending slightly less on reinsurance, even in the market we see today.

Zaffino commented that, “We achieved these significant improvements while modestly reducing the total aggregate reinsurance capped spend.”