One recent development that would not seem to paint a rosy loss picture for the Pollution insurance market: The $700 million addition to Environmental reserves that AIG made over seven quarters between 2011 and 2012.
But even that much negative loss development has to be put in context, according to Robert P. Hartwig, president of the Insurance Information Institute.
It is "a large amount, but AIG was the largest commercial insurer in the United States for many, many years," Hartwig observes. "These are very long-tail liabilities that may date back many years or even decades."
Additionally, AIG was one of only very few insurers covering the risk for many years, notes Rich Sheldon, the Philadelphia-based Environmental practice leader at Willis North America.
In its financial statements, AIG explains that some of the reserve additions pertain to pre-1986 exposures, as well as to Environmental policies written since 1987. The insurer would not elaborate on those reserve additions.
However, those additions have not curbed AIG's appetite for Environmental risks. "We've been in this line of business for 30 years," notes Rich Wagner, New York-based executive vice president and division head of Pollution underwriting for the United States and Canada. "We wouldn't be if it weren't financially beneficial for us. We've made a very large commitment to the business."
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