In the year American International Underwriters (AIU) was named Best Insurer in the World by Euromoney, while its parent company AIG went through troubled times, Nic Walsh, Vice-Chairman of AIU Holdings, analyses the insurance industry’s behaviour and response to the current global crisis.
In your opinion, how would you describe the behavior and answer of the insurance sector to the present world crisis?
The global economic downturn has hit every industry, including insurance, but arguably our sector now plays a more important role than ever as people reassess risk all over the world. At AIU, we have gained a reputation for our claims paying ability from our smallest customers to the largest —we need to continue to service our customers and offer the best products and services through this crisis. So far this year, AIU has retained a very high percentage of clients and business.
How does this reaction compare with the answers put forward by other players from the financial industry, such as banks?
We operate in a highly regulated environment and take a disciplined approach to underwriting. In the case of AIU, I can assure you that our worldwide network of businesses is well-capitalized and financially healthy. We write and price risk appropriately, and our policyholders are well-protected.
How will this crisis impact on insurance clients (in terms of market capacity, rates and so on)?
Clients will be making careful assessments of their risk exposure and either purchasing more coverage than in the past or looking for ways to maintain insurance programs but at a reduced price for less comprehensive coverage. Also, we anticipate that a number of clients may see a decrease in their exposure base (staff, shipments, turnover, new orders, etc) which will of course affect their insurance buying strategies.
Market capacity is still strong. Last year was a tough year for catastrophe due to storm damage, and it’s only natural to see some rate increases in that arena. Certainly, re-insurance has become more expensive.
It will also have an impact on lines that are increasingly important to many large corporate customers, such as Directors’ and Officers’ Liability. AIU has a big market share in D&O, and our experience is enormously important and means that we can respond to the kinds of situations we now see arising around the world.
Do you anticipate that the present crisis might bring about opportunities for the insurance sector? If so, which?
The continuing recession is clearly affecting customer behavior by driving them to push harder for greater value for money. On the other hand, the need to conserve cash is contributing to an increase in corporate risk aversion. Companies that may have been willing to take a potential hit from a large event and cope with it through their own earnings may now be much less inclined to take that risk, which ultimately benefits the insurance sector.
The market has always seen AIU as an innovative company, and we will continue in that tradition.
We’ve always pushed into new lines, and this environment will undoubtedly create new ones that will help us serve our customers at a time when proper risk management is more of a priority.
How do you perceive the role to be played by a large global network of insurance brokers, such as Brokers Link, in linking multinational clients and the markets?
AIU looks forward to working very closely with the Brokers Link network. It is a unique and powerful network of some of the best and largest brokers in their respective countries. The distinguishing characteristic of the network assures that our customers will receive service which will be best in class. Both the structure and operating philosophy of Brokers Link is closely aligned to that of AIU which creates a level of trust and confidence which further enhances our joint efforts on behalf of our global, regional and local clients. The Brokers Link network is quite strong in Latin America, Asia and Europe which aligns it with a number of AIU’s most important markets for growth in the future. Combined with Brokers Link’s centers of excellence in segments such as Aviation, Logistics, and Construction, we see significant scope for cooperation around the world.
How would you describe the new AIU and its development in the near future, in terms of its global presence, of its core competencies, and of its relationships with its main clients?
Under the plan announced on March 2, AIU Holdings will serve as the holding company for AIU’s Commercial Insurance, Foreign General Insurance and Private Client Group units. It will be a separately capitalized entity with substantial liquidity and its own governance structure, board of directors, management team and brand. On April 21st, that process was accelerated with the announcement that AIU Holdings will be placed into a special purpose vehicle (SPV). This step speeds up the move towards independence from AIU and prepares for the potential sale of a minority stake in AIU Holdings, which ultimately may include a public offering of shares.
AIU Holdings is a unique global franchise. Our worldwide network has been a trusted market leader in property and casualty insurance for 90 years, combining global reach with local expertise to cover a wide range of risks for clients around the world. Serving over 40 million individual and commercial customers and with a global network of underwriting, claims and service operations in over 130 countries and jurisdictions, AIU Holdings is uniquely positioned to service its clients worldwide.
