AIG is no longer in the “renewal phase”: CEO Zaffino

American International Group (AIG) is no longer in a “renewal phase” and is focused on growth, taking advantage of market opportunities while maintaining underwriting discipline, according to chairman and CEO Peter Zaffino.

Zaffino made the comments at a fireside discussion during the 2024 KBW Insurance Conference on Wednesday (September 4).

Following that phase, Zaffino is optimistic about AIG's prospects, including its artificial intelligence (gen AI) generation strategy and market opportunities in its excess and surplus (E&S) lines.

As it pursues new avenues for growth, AIG continues to prioritize targeted underwriting with a comprehensive reinsurance program for all business lines, he added.

“The challenge we have today is that we need more money to support our current core insurance. However, that will completely derail our ongoing capital management strategy and the realization of our expected growth potential,” said Zaffino.

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

E&S dealer distribution 'strong growth driver'

In a competitive market, AIG has developed its excess and surplus lines (E&S) capabilities, which Zaffino describes as a strong driver of growth. The E&S market, particularly in North America, offers unique opportunities for AIG to expand due to strong new business activity and improved retention rates.

“The market was unbelievable to us. The distribution of E&S wholesalers is incredibly strong,” said the CEO.

Zaffino acknowledged that retention fundamentals in the E&S business have improved significantly, with retention rates rising from the low 60s to mid-70s.

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

Despite concerns about the rate change affecting the first half of the year, Zaffino said activity in the sector has not slowed, and AIG is seeing improvements in all aspects of its E&S.

Speaking about the insurance distribution network, the CEO also highlighted how a focus on technical underwriting and consistent risk appetite helped build trust among the consumer community – a key component to AIG's continued success.

“Sellers always want as much as possible, but the first thing they need is consistency and food vulnerability,” Zaffino said.

Where are the other market opportunities for AIG?

Along personal lines, AIG's high-net-worth business is another area where Zaffino sees growth potential. However, this aspect comes with challenges, especially in the management of clustering risks, where too much concentration in one area can lead to significant exposure to events such as wildfires.

AIG is addressing these issues by restructuring its portfolio and using its power of surprise, which Zaffino describes as a key differentiator in the market.

“Our long-term strategy, which we apply to… claims, capacity, loss control, policy wording, and having a close relationship with your customers,” he said.

Cyber ​​insurance is another area where AIG has been careful in its approach. “When you're putting in value and taking out a lot of money in any business sector that has systemic risk, and the possible outcomes are very unpredictable, you have to be careful,” Zaffino said.

AIG reduced its capital limits and relied more heavily on reinsurance to manage its exposure to systemic risks. The company's average net limit for cyber insurance is now closer to $4 million to $5 million, much lower than in the past, which lessens the impact of any potential loss.

“(We make sure) that we get the right prices. There is little competition in that area, but we have great insurance to protect us,” said Zaffino.

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