An AIG executive said recent changes in some competing companies’ positions regarding writing excess policies over AIG primary policies, or co-surety policies with AIG, are not based on market realities. Competitors are trying to take advantage of the uncertainty surrounding the AIG liquidity crisis, suggested John Doyle, president and CEO of Commercial Insurance at AIG. His remarks came during a Risk and Insurance Management Society (RIMS) webinar, “Risk Management Strategies in an Unsettled Financial Market.” Regarding information revealed yesterday in a Marsh conference call that Travelers and Chubb would no longer write co-surety policies with AIG as a partner, Mr. Doyle said other companies had taken similar positions in other lines of business, but it “quickly dissipated,” and he added state regulators have not been happy with the actions of those companies. Mr. Doyle said almost all state regulators have released statements speaking to the strength of AIG’s insurance operations. The conglomerate’s non-insurance business problems have forced it to obtain an $85 billion line of government credit in exchange for signing over a 79.9 percent interest in the firm. His statements came as he sought to clear up questions regarding the financial strength of AIG’s insurance operations amid the financial turmoil surrounding the parent company. Mr. Doyle said the insurance operations are strong, and added that the events over the last 10 days have never been about the insurance companies at AIG. Rather, he said, the problems have centered on products written by AIG Financial Products, which is part of the company’s financial services operation and is outside of the insurance companies’ domain. He said the insurance companies’ assets minus obligations are the largest of any insurance company in the U.S., and that the financial strength and capital is greater than any of AIG’s competitors. The insurance operations are still taking on risk, and still paying claims, he added. If AIG had been forced to file for bankruptcy, Mr. Doyle said, the insurance companies would not have followed suit. One inquiry from a webinar listener, relayed to Mr. Doyle by moderator Sam Friedman, editor in chief of National Underwriter, questioned why, if AIG’s commercial insurance operations are sound and profitable, AM Best downgraded the company to “A” from “A-plus.” Mr. Doyle said he is in dialogue with the rating agency, and noted that Best had questions about whether the commercial insurance operations would be broken up. He pointed to recent statements by new AIG CEO Edward Liddy affirming that commercial insurance operations will not be sold and are core to the company. Mr. Liddy will be holding an investor conference call next Friday to outline the company’s strategic vision regarding which assets will be sold to pay off the federal loan, Mr. Doyle said. Representatives for FM Global and Zurich North America also participated in the webinar, and answered questions regarding their views on the AIG bailout and whether their appetites for risk would change given AIG’s current situation. Ruud H. Bosman, executive vice president of FM Global, said from FM Global’s perspective in commercial property insurance, there was no reason for the bailout. Buyers would have been fine with or without the bailout, he said. He noted there are other interconnected consequences that the government considered that he is not privy to, and he was speaking just from a commercial property perspective. Regarding a change in appetite, Mr. Bosman said FM Global is committed to its corner of the specialty market, but that the company could be looking to expand its business inside that market. Such a decision, though, would be based on FM Global’s balance sheet rather than what is happening with competitors. Commenting on the AIG bailout, Mike Foley, CEO of North American Commercial Operations at Zurich, said, “These are unprecedented times that we’re living in, and very complicated issues.” He said he supported the government’s decision. From an insurance perspective, he said the bailout was good in that it brought stability to the industry that may not have been there if the company had not received a loan. On competing for AIG’s business, Mr. Foley said Zurich has traditionally competed with AIG on many lines, and would continue to do so. As for any change in strategy, he said Zurich will evaluate whether there are capacities that it wants to take higher limits on, but the company’s overall business strategy has not changed. To listen first hand to the RIMS webinar, go to
Friday, September 26, 2008
AIG Exec Questions Competitors’ Motives