Interest rates for several commercial insurance lines continued to rise by double-digit percentages during the first quarter, with cyber liability almost doubling, American International Group Inc.’s chief executive said on Wednesday.
The insurance company, which reported increased profits and revenues for the quarter, is also examining potential claims related to the war in Ukraine, said Peter Zaffino, chairman and CEO of AIG, in an interview with analysts.
Globally, commercial insurance prices increased by 9% on average during the quarter, he said. In North America, commercial interest rates increased by a total of 8%, and insurance prices for retail properties rose by 14%. Lexington, AIG̵7;s operations for surplus and surplus lines, saw interest rates increase by 13% and financial lines increased by 12%, including an 85% interest rate hike for cyber liability, Zaffino said.
International commercial rate hikes totaled 10%, driven by financial items, which increased by 21% – including more than 60% rate hikes on cyber-real estate, which increased by 14%; (Europe, Middle East and Africa), which also increased by 14%; and AsiaPac, which increased by 10%, ”he said.
The AIG has received claims related to the war in Ukraine, which began in February, but they are not expected to be significant, Zaffino said. Most of the allegations were made on political violence and political risk policy, he said.
Most common property and energy policies, which are likely to be affected by the conflict, contain extensive war exclusions, Zaffino said. Aviation policies can also be affected, but the claims issues are “complex and will take time before all the relevant facts and resulting coverage consequences are fully disclosed,” he said.
AIG reported $ 4.25 billion in net profit for the first quarter, an increase of 9.9% over the same period last year. Its real estate / accident business reported a gross premium of $ 11.5 billion, an increase of 7.3% over the quarter of 2021, and net premium income increased by 2.4% to $ 6.63 billion.
In North America, net premium income increased by 7.5% to $ 3.15 billion, and commercially increased by 5.9% to $ 2.95 billion. The commercial operations include AIG’s acquired reinsurance operations, where the net premium was unchanged largely due to the company reducing its property disaster operations.
“The market environment that lasted until 1/1 led us to conclude that AIG Re could not achieve appropriate levels of risk-adjusted return in special property taxes,” said Zaffino.
The property / claims business reported a total cost of 92.9%, a significant improvement over the 98.8% reported during the disaster-stricken first quarter of 2021. The commercial routes in North America improved to 88.8% from 106.7%.
AIG continues to expect to complete a second-quarter listing of its life and retirement operations, Zaffino said.