Peter Zaffino, chairman and CEO of American International Group (AIG), said the company is no longer in a “rehabilitation phase” and is focused on growth and capitalizing on market opportunities while maintaining underwriting discipline.

Zavino made his remarks in a friendly chat during the KBW Insurance Conference 2024 on Wednesday (September 4).

In its earnings report for the quarter ending June 30, 2024, the global insurance company revealed a loss of $4.7 billion, primarily due to the completion of the CoreBridge Financial merger, a process that began in 2020.

Beyond this phase, Zaffino expressed optimism about AIG’s prospects, including its generative artificial intelligence (gen AI) strategy and market opportunities in the E&S lines.

He added that as it seeks to explore new avenues for growth, AIG continues to prioritize disciplined underwriting through a comprehensive reinsurance program across all lines of business.

“The challenge we face today is that we need more capital to support our existing core general insurance business. However, this will naturally evolve as we continue to manage capital and realise our expected growth potential,” Zavino said.

“We continue to prioritize prudent risk selection, limit management, and appropriate terms and conditions.”

Distribution of brokers in the field of environmental and social services “a strong growth engine”

In a competitive market, AIG has been honing its surplus and surplus lines capabilities, which Zavino describes as a strong driver of growth. The surplus and surplus lines market, particularly in North America, presents unique opportunities for AIG to expand due to strong new business activity and improved retention rates.

“The market has been amazing for us,” said the CEO. “The distribution of brokers in the wholesale E&S space is incredibly strong.”

Zavino acknowledged that employee retention fundamentals in the environmental and services sector have improved dramatically, with retention rates rising from the lows of the 1960s to the mid-1970s.

This increase in business retention is an important indicator of how AIG is moving from simply maintaining its portfolio to growing it.

Despite concerns about price changes impacting the first half of the year, Zavino said activity in the sector has not slowed, and AIG is seeing improvements in every aspect of its environmental and social operations.

Speaking about the insurance company’s distribution network, the CEO also highlighted how a focus on technical underwriting and continued appetite for risk has helped build trust within the broker community – a critical component of AIG’s continued success.

“Brokers always want to make as much money as possible, but the number one thing they need is consistency and risk tolerance,” Zavino said.

Where do other market opportunities lie for AIG?

In personal lines, AIG’s high-net-worth businesses are another area where Zaffino sees potential for growth. However, the sector faces challenges, particularly in managing pooling risk, where overconcentration in a particular region can lead to significant exposure to events such as wildfires.

AIG is working to address these issues by recalibrating its portfolio and leveraging its claims capabilities, which Zavino describes as a key differentiator in the market.

“The long-term strategy for us, which we are executing on, is claims, capacity, loss control, policy formulation, and maintaining intimacy with customers,” he said.

Cyber ​​insurance is another area where AIG has been cautious in its approach. “When you’re pricing and deploying capital in any business line that involves systemic risk, and the probabilistic outcomes are highly unpredictable, you have to be careful,” says Zaffino.

AIG has reduced its overall limits and focused heavily on reinsurance to manage its exposure to systemic risk. The company’s average overall cyber insurance limit is now around $4 million to $5 million, much lower than in the past, reducing the impact of any potential losses.

“We make sure we get the pricing right,” Zavino said. “There’s a little bit of competition in this space, but we have tremendous reinsurance protecting us.”

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