AIG recorded 15 percent commercial rate increases in the fourth quarter of last year and believes market hardening will continue through 2021.
Announcing fourth-quarter and full-year 2020 results, Peter Zaffino, AIG’s president and chief operating officer, said the insurer’s general insurance business continued to see “considerable” rate increases and tighter terms and conditions in the fourth quarter.
He added that commercial saw “strong” rates momentum of about 15 percent and improvement across all lines expect workers compensation, according to results service Seeking Alpha.
International commercial rates were up 14 percent in Q4 and accelerated in the second half of last year, explained Mr Zaffino, who will be taking over as AIG’s CEO from Brian Duperreault on 1 March.
North America commercial rate increases were 21 percent in the fourth quarter, compared to 14 percent in the prior-year period, explained Mr Zaffino. He said this improvement was driven by excess casualty that saw rates increase of 45% and financial lines that were up over 25 percent, led by a 35 percent rise in D&O. North American retail property and Lexington wholesale property both saw rates increase by about 30 percent and Lexington casualty business was up 25 percent
Mr Zaffino expects the commercial market hardening to continue in 2021.
“We expect to see these rate increases be above loss costs. We expect that these rate increases will be balanced across our global portfolio and across multiple lines of business,” he said.
He added that AIG is going to be “very disciplined” about where it deploys its capacity for P&C risks and ensure it gets the “right price for the exposure”.
AIG’s CFO Mark Lyons agreed that there are no signs of price increases decelerating. He added that price rises started a little bit later for international business, so its market trajectory is slightly different to North America.