AIG had “tremendous outcome” at January reinsurance renewals: CEO Zaffino

Global insurance giant AIG secured a “tremendous outcome” at the January 2024 reinsurance renewals, according to CEO Peter Zaffino who explained that AIG broadened its property catastrophe coverage at 1/1.

Zaffino said that AIG secured consistent capacity at improved terms, as reinsurance partners showed their commitment to the company as its results improve.

Zaffino noted that, “AIG’s reinsurance purchasing is deliberately weighted to January 1, which enables us to strategically optimise the outcome across our reinsurance placements and provides us with clarity on our cost of reinsurance at the beginning of the year.”

He went on to say that we have “seen significant changes in the global property market over the last two years,” which makes analysing and quantifying changes in AIG’s risk profile “increasingly complex.”

Because of this, Zaffino went on to say that, “Calculating the risk adjusted rate change can be complicated and is often inconsistent,” so the CEO explained how AIG determines the risk adjusted change at its renewal, saying that it’s important to be comparing like for like, as closely as possible.

“When applying the methodology I just described, 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,” Zaffino said.

“The headline is, that we were able to significantly improve our property cat structure and reinsurance coverage provided,” he said.

He noted that the overall spend has reduced by approximately $200 million and “our core property treaties excluding Validus Re have slightly lower ceded premium year over year.”

On the AIG property catastrophe reinsurance program renewal, Zaffino said, “Our core commercial North America retention of $500 million remained unchanged for the second straight year. The attachment on our dedicated Lexington occurrence tower was unchanged at $300 million.

“In both cases, the modelled attachment point is lower and the exhaust limit is higher.

“Our international property cat per-occurrence structures renewed with a reduced retention in Japan to $150 million, a $50 million improvement from the prior year. The rest of the world attachment remains unchanged at $125 million.”

Zaffino went on, “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.”

Zaffino went on to explain that AIG has renewed its property catastrophe aggregate reinsurance as well, with improved protection being provided by that treaty as well.

“Our property cat aggregate cover was also successfully renewed with improved coverage, further reducing our volatility from frequency of loss,” Zaffino explained.

He further said that, “The aggregate now includes a stand-alone sub-limit 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 aggregate deductible for North America is $825 million dollars. The North America other perils deductible is $350 million, which is a new deductible.

“And Japan and the rest of the world the doctor was are $200 million and $175 million respectively.

“These are subject to each and every loss deductibles of $20 million, other than for North America wind and earthquake which are at $50 million. Our return period attachment point is lower year over year.

“For all of our major proportional treaties across a range of classes, we improved or maintained our ceding commission levels, reflecting our market leading underwriting expertise and position in the market.”

Summarising the reinsurance renewals for AIG, Zaffino said, “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.”

There have clearly been improvements to AIG’s property catastrophe reinsurance coverage at the 2024 renewal, not least the addition of more cover for secondary perils, while a lower return period attachment point for the aggregate reinsurance will also be deemed a successful feature of this renewed program.