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AIG cuts Florida reinsurance limits by more than 40%

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AIG CEO Peter Zaffino said that the firm’s Validus Re business cut its net Florida limits by more than 40% at the June renewals, working in co-ordination with the reinsurer’s ILS platform AlphaCat.

“Since AIG's acquisition of Validus Re in 2018, we reduced the overall limit in Florida by more than 65% or approximately $400mn of annual limit, demonstrating Validus Re's continued discipline and focus on volatility reduction,” he added.

The retraction has taken Florida domestics down to less than 2% of Validus Re's total net premiums written. “Our focus remains on regional and nationwide firms in the US as well as international diversification,” Zaffino said.

AIG did not provide any specific disclosure on its AlphaCat business in the latest quarterly financials.

This comes after RenaissanceRe said it dropped off five Floridian reinsurance programmes at the renewal and that Florida domestics made up less than 3% of its gross premium.

Validus Re also bought further retro protection in June after lining up worldwide aggregate coverage at 1 January, Zaffino noted.

Discussing the firm’s overall reinsurance purchasing in the quarter, he said AIG had been very active, with 25 specific layers on a variety of treaties placed during the period.

"Notably, in nearly every instance, we were able to enhance our terms and conditions, our placements were at equivalent or improved pricing in a reinsurance market that is experiencing tighter terms and conditions and rate increases.”

The changes included reducing the trigger on its occurrence North America cat programme through adding several buydown layers for peak zone exposures. This included coverage for US wind, Asia wind and California earthquake.

The insurer also discussed inflation risk and that within its general insurance business, it had been taking “strong pre-emptive action” to on rising claims costs by taking higher-attaching positions within insurance programmes.

For example, the carrier’s excess casualty attachment points are now 3.5 to 5.5x higher than in 2018.

"This significantly increased distance from attaching is a key overall portfolio benefit,” said CFO Mark Lyons, pointing to expectations of 4%-5% total inflation in the near to medium term.

“Our second quarter rate increases, together with our view of pricing for the rest of the year, provide continued margin in excess of this loss cost trend,” Lyons added.

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