Validus Re will benefit from the improvement in the property damage reinsurance market

The rapidly improving real estate catastrophe reinsurance market is a solid opportunity for American International Group (AIG) to more aggressively leverage the capabilities of Validus Re, the company’s underwriting arm, the AIG CEO said. , Peter Zaffino, in conversation with KBW.

logo-group-validusZaffino noted that the current shortfall in real estate catastrophe reinsurance capacity is more like the really tough market conditions of the past, which KBW analysts believe should lead to much faster changes in rates, terms and conditions and , ultimately, expected returns.

KBW said: “While the reinsurance industry has missed the expectations of years past for improved discipline following large (and often surprising) catastrophic claims, we believe the absolute lag between the rise in inflation-related demand and declining supply (resulting from losses, trapped capital, unfavorable exchange rate, declining investment portfolio and partial or total withdrawal of several actors from catastrophe reinsurance underwriting to property) will produce sustained industry-wide discipline; is reflected in the fact that to date Validus Re – like, in our view, most reinsurers – has not yet issued quotes for January 1 renewals.

Analysts say AIG’s final decisions regarding its reinsurance acceptances and cessions in 2023 will almost certainly impact the business mix, which should affect the individual components of its combined ratio.

But overall, they believe the current environment points to significant improvement in margins with volatility well contained. In addition, they are increasingly confident that the recent strengthening of AIG’s financial line reserves implies better overall reserve development for next year and beyond.

Stratumn, by SIA Partners

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