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AIG chief sees a need to reassess cat risks in the midst of climate change



The insurance industry needs to adjust its modeling and pricing of disaster risks as losses increase due to climate change, said American International Group Inc.'s top executive on Friday.

Since 2012, excluding losses from covid-19, there have been 10 disasters with losses of over $ 10 billion and nine of these disasters have occurred since 2017, said Peter Zaffino, President and CEO of AIG, in a conference call with analysts to discuss the insurance company's third quarter results.

Average cat losses for the past five years were $ 114 billion, an increase of 30% from the 10-year average and 40% from the 15-year average, said Zaffino.

"We have never seen consistent cat losses at this level and as an industry must recognize that frequency and severity have changed dramatically as a result of climate change and other factors, he said.

Although cat models have "tended to "accepted over the past 20 years, estimates have been less accurate over five years.

AIG has made frequency and difficulty adjustments in its warranty for forest fires, US winds, storm surges, floods and many international hazards," Zaffino said.

"We will continue to leverage new scientific studies, improvements in supplier model work and our own claims data to calibrate our views on risk over time and ensure that we price cat risks correctly," he said.

AIG, which has seen significantly improved results since it began its turnaround strategy for 201

7, reporting a sharp increase in profit for the third quarter.

Net revenue was $ 1.66 billion, compared to $ 281 million in the same period last year. The increase was largely due to net realized investment gains and improved property / accident insurance results, according to AIG's earnings report.

Disaster losses for the quarter fell to $ 628 million from $ 790 million in the previous year's quarter.

General. Gross premium income for insurance increased by 13% to $ 9.31 billion, and net premium income increased by 11% to $ 6.59 billion. North American commercial lines' net premium income increased by 18% to $ 2.58 billion, and international commercial lines increased by 15% to $ 2.07 billion.

In commercial North America, the growth of excess accidents was driven by more than 50%; Lexington Wholesale – AIG's surplus business – which increased by more than 30% for property and accidents, and financial lines, which increased by more than 20%, said Zaffino.

In international commercial, financial lines grew by 25%; its Lloyd's business Talbot grew by more than 15%; and indebtedness increased by more than 10%, he said.

"In addition, gross new business in global commercial grew by 40% year on year to more than $ 1 billion," said Zaffino.

Prices also increased. , with global interest rate hikes averaging 12%, he said. "In many cases, this is the third year in which we have achieved double-digit interest rate hikes on our portfolio," he said. , and Canada, where prices rose 17%, he said. International trade interest rates increased by 13%

The insurer's total insurance share improved to 99.7% during the third quarter from 107.2% the previous year. The combined ratio of North American commercial lines deteriorated to 120% from 107%, largely due to reserve reinforcement related to an adjustment in 2018 reinsurance recovery after the insurer received subrogation payments, according to the earnings report. North America's total accident year improved to 90.5% from 94.2% in the third quarter of last year.

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