The leadership of insurance giant American International Group (AIG) has provided the market with a little insight into how it it sees the claims situation with typhoon Hagibis at this point in time.
After the experience with 2018’s typhoon Jebi the market has been fearing a similar experience with 2019’s Hagibis, resulting in wide and high initial estimates of loss being set by risk modelling firms and reinsurance companies.
But, speaking at a Goldman Sachs conference yesterday, Peter Zaffino, the CEO of AIG’s General Insurance division, explained that his company is seeking claims coming in at a lower rate than anticipated.
“It’s a very complicated typhoon,” Zaffino explained, adding that AIG doesn’t yet have any specific numbers to share on its losses from Hagibis, but he would say that “The claims count is coming in lower than we expected at this stage.”
Now, it’s very early days still with typhoon Hagibis and as is typical in Japan claims can be a little slower to flow in.
But given AIG’s reach into the Japanese primary property and commercial marketplaces, as well as reinsurance through its Validus operations, you’d expect the company to have a reasonable view of the velocity of claims, especially as compared to Jebi.
However, Zaffino went on to explain that it might be too soon to view this as a positive, in relation to where AIG’s eventual loss from Hagibis may settle.
He said the company expected wind and flood impacts to be more balanced with Hagibis, but that so far wind related claims seem to be running ahead.
Flooding claims could be more complex in the case of typhoon Hagibis, given it came so soon after other typhoon weather events and was also followed by another period of extreme rainfall that exacerbated the flooding just a matter of days later.
“It’s just a very slow emerging claim that I think is going to take a little bit of time before we actually can get our arms around the aggregate,” Zaffino continued.
But, on the positive side Zaffino explained that the loss picture with Hagibis is not looking any worse than the company had originally forecast, but adding that AIG would need some more time before it could make a more accurate assessment on the loss.
He said that AIG will update on its typhoon Hagibis claims during the fourth-quarter earnings season, adding that he already has a view on how the storm compares to Jebi for the firm but that analysts would have to wait until earnings season to find out.
Zaffino further explained that it is very difficult to have full visibility of losses like this so soon after the event, but it hasn’t coloured his view of the property insurance market in Japan.
“The market has always been one that rebounds and has produced underwriting profits over as long as I can remember,” he explained. “This market will adjust to these events and so we think it’s a great market and we’re very happy to be in it.”
AIG CEO Brian Duperreault also commented on the Japan market saying on Japan that, “We do think, in terms of the loss ratio, there’s enough margin to price for cat.”
Duperreault continued to explain that he sees plenty of margin to price for the catastrophe exposure in Japan, but he feels the expense of operating there is too high and expects to address this with the AIG 200 initiative, which he said “will have an outcome for us to make us more competitive in that marketplace, but there’s enough margin.”
It’s difficult to read into AIG’s comments too much, but the fact the executives didn’t suggest that claims from Hagibis are running high, or above expectation, could be positive for the market.
While insurance and reinsurance industry loss estimates continue to range up to as high as $16 billion for typhoon Hagibis, there is an increasingly widely held view that it could come in a bit lower than that, closer to $12 billion, it seems.
AIG’s comments perhaps suggest that this may be the case and the top-end of initial estimates could have been a little on the high side.
But, at the same time, it may just be that the flood related claims are much slower to come in and as we explained last week, there are also some that fear typhoon Hagibis could result in loss creep emerging after the April reinsurance renewal, once primary carriers fully true-up on their losses.