With American International Group almost fatally wounded by the credit crisis, and sharks smelling blood in the water, the pressure is on to reassure nervous buyers that AIG's insurance companies are sound, safe and secure.
To their credit, senior AIG officials are not ducking for cover, aggressively communicating the reality that for all practical purposes, their property-casualty insurance units are as sound as before Uncle Sam was given the bum's rush to deliver an $85 billion bailout to the parent firm.
The big question is whether skittish risk managers will stick with a company that has a dark cloud overhead, or play it safe by moving on to other insurers that aren't burdened with so much baggage.
AIG offered no apologies or excuses during a webinar I moderated about the bailout, put on by the Risk and Insurance Management Society.
The first 20 minutes was little more than an infomercial for the three participating carriers, with FM Global and Zurich joining AIG to plug away after being asked by RIMS to lay out why risk managers should be comfortable placing or renewing coverage with them. They all easily hit that Larry King-worthy softball out of the park.
But the 35 minutes of Q&A that followed was totally unscripted and quite engaging, I thought–and not just because batting practice was over, and I was the one pitching high, hard ones at the panelists.
John Doyle–who, among his many titles, serves as president and CEO of AIG Commercial Insurance–stood his ground despite being peppered with tough questions from the more than 500 attendees who signed up for the live event, with the queries filtered and supplemented by yours truly.
While admitting his carrier is in a state of flux given the uncertain future of his parent firm, he reiterated that regulatory firewalls meant AIG's insurers have their surplus intact, and that their assets are protected against being drained by AIG corporate HQ to prop up any other subsidiary.
Mr. Doyle was also combative rather than defensive, suggesting that recent changes in some competing companies' positions regarding the writing of excess coverage over AIG primary policies, or co-surety coverage written with AIG, are not based on market realities. He charged that competitors are trying to take advantage of the uncertainty surrounding AIG's liquidity crisis. Imagine that!
This is just the beginning for AIG. The softening market was already increasingly competitive, putting every policy in play. But now that AIG's mortgage woes have raised doubts in the public's mind, it's only natural for competitors to try to capitalize on AIG's vulnerabilities–real and imagined.
With every CFO likely to ask their risk manager how they feel about AIG, buyers and brokers can either move their accounts out of fear or simple prudence, or take a deep breath and stay put.
I doubt there will be a run on the bank, so to speak, but I do think every piece of business written by AIG will be subjected to far more scrutiny than usual in this renewal season. How could any self-respecting risk manager operate otherwise? Due diligence will be the rule, not the exception.
The biggest challenge for AIG will be to maintain underwriting discipline at a time when buyers–both current and prospective–might be tempted to leverage the firm's reputational risk to push for lower prices, higher limits and looser terms. How far will AIG go to convince wary risk managers to stick with them?
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