Insurance brokers in Connecticut and elsewhere are preparing for a busy renewal season on property and casualty policies, as carriers weigh whether to hike premiums to cover investment losses this fall and as embattled American International Group Inc. defends its accounts from rivals looking to poach business.
January is typically a busy month for commercial property-and-casualty policy renewals ”“ and is shaping up as the most significant since 2002, after the terrorism attacks contributed to a “hard” market of rising rates that took several years to revert to a softening market of declining rates.
After agreeing in September to loan New York City-based AIG $85 billion to provide a bulwark against its exposure to the real-estate credit markets and other instruments, federal regulators agreed this month to increase that amount to $150 billion after the company reported it continued to struggle.
Shortly after the initial bailout, Connecticut insurance Commissioner Thomas Sullivan said that some consumers were being approached with offers to replace their AIG policies on grounds AIG might not be able to pay claims. Sullivan stated he believed the company”™s insurance entities are sound, and noted it is illegal under the Unfair Insurance Practices Act in Connecticut for life insurance companies and agents to make such claims.
The highly competitive commercial property-and-casualty market is another matter, however. In a survey this fall conducted by New York City-based Advisen Ltd., more than seven in 10 brokers indicated they planned to get competing quotes for commercial accounts they held with AIG, though the vast majority expressed confidence in AIG”™s financial strength.
Advisen indicated customers can expect AIG to fight to retain business on the rate front, possibly providing a brake on escalating premiums some fear following carriers”™ increased losses from investments and payouts on claims in the past year. That had yet to occur in the third quarter, as commercial customers continued to report softening prices for various lines of insurance.
At last report, AIG had direct written premiums of more than $360 million from property-and-casualty policyholders, trailing the Travelers Companies Inc., but still among the largest books of business in the state. AIG”™s lone significant subsidiary based in Connecticut is Hartford Steam Boiler Inspection & Insurance Co.
The company also owns AIG Trading Group Inc. in Wilton, which, rather than producing insurance, focuses on foreign currency exchange and commodities trading.
Warren Ruppar, president of the Connecticut chapter of the Independent Insurance Agents & Brokers of America, declined comment on the local impact on brokers and customers of AIG. In September, IIABA released a statement expressing confidence in the insurance industry”™s stability, but did not address the impact on company clients and brokers.
Large commercial brokers in Fairfield County include Marsh USA Inc. and Pierson & Smith Inc., which both have their main local offices in Norwalk. Early next year, Marsh launches Marsh & McClennan Agency to focus on small businesses.
Meanwhile, AIG reportedly has suffered a mini-exodus of talent in recent weeks, with Greenwich-based W.R. Berkley Corp. hiring AIG veteran Frank Costa to run a new unit for energy risk underwriting; and John Benedetto to handle executive liability policy underwriting. Both men brought several AIG colleagues with them to W.R. Berkley.