Chubb, Travelers Will Not Partner With AIG On Surety Bonds

Chubb Group of Insurance Companies and Travelers will no longer participate as partners on co-surety bonds with American International Group, according to a Marsh brokerage executive.

That news emerged during a telephone conference call held today by Marsh to provide an update on the global commercial insurance market in light of the turmoil in the financial markets.

Mark Nickel, who is with Marsh’s surety practice, said Travelers is not willing to participate on co-surety on any bonds not approved by last Friday 19.

Clients will need to replace either Travelers or AIG, he said. He added that, up until Nov. 19, in order to allow for an orderly transition, “Travelers is prepared to absorb AIG’s share of the co-surety exposure if the client needs that additional time to find additional surety capacity or to replace either Travelers or AIG.”

The company will only consider participating with AIG if AIG can provide a third-party backstop acceptable to Travelers, Mr. Nickel said.

The situation with Chubb is similar, he added, in that the company will not accept co-surety with AIG as a partner.

Chubb is giving clients 30 days to make the transition, he said. “Chubb will, however, consider AIG clients in a joint venture project, but this will depend on the complexity and duration of the project,” Mr. Nickel explained.

He noted that AIG is a relatively small player in the domestic contract surety market, having pulled back in that area several years ago. But the company does play a significant role in the international surety market.

On the casualty business, Marsh sought to clear up some false rumors that have been circulating, including one that clients are seeking extensions or alternatives to their AIG coverages midterm.

Marsh said midterm replacement is the exception, not the rule, but the brokerage did note that clients who are up for renewal who would not have considered moving before are giving the idea some thought now.

With respect to property markets, Marsh said AIG subsidiaries exceed Marsh’s minimum financial guidelines, but clients have been inquiring about their overall exposure to AIG.