A.M. Best puts AIG’s ratings under review with negative implications

Status due to the insurer’s reinsurance deal and material adverse

A.M. Best puts AIG’s ratings under review with negative implications

Insurance News

By Mina Martin

A.M. Best has placed under review with negative implications the “bbb” long-term issuer credit rating (Long-Term ICR) of the New York City-based American International Group, Inc. (AIG) as well as its insurance subsidiaries’ financial strength ratings and long-term ICRs.
 
The ratings agency issued AIG’s under review status in response to the insurance giant’s announcement that it will include a material adverse adjustment as well as a capital supporting reinsurance transaction for its US commercial business in its fourth quarter financial statement.

Want the latest insurance industry news first? Sign up for our completely free newsletter service now.
 
A.M. Best said: “This adverse development of loss reserves follows a $3.6 billion net adverse reserve adjustment for the fourth quarter of 2015 in the same longer-tailed lines of business.”
 
While the potential for further reserve development is expected of AIG, A.M. Best said the timing of the latest charge underlines the “challenges that AIG management continues to face in reserving, pricing, and handling this longer tail commercial lines business, and the effectiveness of the group’s enterprise risk management function.”
 
The reinsurance deal is expected to absorb some of the expected reserve development, as it covers any reserve development on the covered lines in excess of the current carried reserves of about $35.7 billion on a quota share basis, up to 80% of 14.3 billion, which is the limit of the reinsurer’s liability.
 

Related stories:
Mega deal between AIG and Berkshire Hathaway prompts concern
Are “too big to fail” insurers about to have their tags changed?

 

Keep up with the latest news and events

Join our mailing list, it’s free!