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Rates for several commercial insurance lines continued to rise by double-digit percentages in the first quarter, with cyber liability rates nearly doubling, American International Group Inc.’s top executive said Wednesday.
The insurer, which reported increased profit and revenue for the quarter, is also reviewing potential claims related to the war in Ukraine, said Peter Zaffino, chairman and CEO of AIG, on a call with analysts.
Globally, commercial insurance rates increased by 9% on average in the quarter, he said. In North America, commercial rates increased 8% overall, with retail property insurance rates rising 14%. Lexington, AIG’s excess and surplus lines business, saw rates rise 13% and financial lines increased 12%, including an 85% rate increase for cyber liability, Mr. Zaffino said.
“International commercial rate increases were 10% overall, driven by financial lines, which increased 21% — including more than 60% rate increases in cyber — property, which increased 14%; (Europe, the Middle East and Africa), which also increased 14%; and AsiaPac, which increased 10%,” he said.
AIG has received claims related to the war in Ukraine, which began in February, but they are not expected to be material, Mr. Zaffino said. Most of the claims were made on political violence and political risk policies, he said.
Most standard property and energy policies, which are most likely to be affected by the conflict, contain broad war exclusions, Mr. Zaffino said. Aviation policies could also be affected, but the claims issues are “complex and will take time before all the relevant facts and resulting coverage implications fully emerge,” he said.
AIG reported $4.25 billion in net income for the first quarter, a 9.9% increase over the same period last year. Its property/casualty business reported gross premium of $11.5 billion, a 7.3% increase over the 2021 quarter, and net premium written rose 2.4% to $6.63 billion.
In North America, net premium written increased 7.5% to $3.15 billion, with commercial rising 5.9% to $2.95 billion. The commercial business includes AIG assumed reinsurance business, where net premium was flat in large part because the company reduced its property catastrophe business.
“The market environment that persisted leading up to 1/1 led us to conclude that AIG Re could not achieve appropriate levels of risk adjusted returns in property cat in particular,” Mr. Zaffino said.
The property/casualty business reported a combined ratio of 92.9%, a significant improvement over the 98.8% reported in the catastrophe-hit 2021 first quarter. The North America commercial lines combined ratio improved to 88.8% from 106.7%.
AIG continues to expect to complete a second-quarter initial public offering of its life and retirement business, Mr. Zaffino said.