AIG will remedy HNW woes with alt-capital in non-admitted markets

AIG will pull property coverage for high-net-worth clients into non-admitted market solutions to better manage prices and terms, then bring in third party capital to mitigate runaway reinsurance costs.

“We are going to move homeowners and possibly other products in more states to the non-admitted market,” CEO Peter Zaffino (pictured) said of his company’s ongoing reworking of AIG’s high-net-worth client offer.

Pinched between regulatory constraints and understandably skyrocketing reinsurance costs for a line of business bearing systemic and aggregated cat risks, the admitted homeowner cover for HNW is proving a “very complicated and challenging market.”

The transition from admitted homeowners coverage to non-admitted specialty or a hybrid model began in the second quarter in unspecified cat-prone states. AIG will focus the transition on cat-exposed jurisdictions where the high-net-worth business is often over-concentrated.

The goal will be increased flexibility in pricing and terms as well as a longer-term hope to hack away at runaway reinsurance costs, Zaffino said. Non-admitted structures will grant the required “flexibility” on the offer and third0party capital might grease the back-end of the deal.

“I don’t see reinsurance costs for the high-net-worth market generally becoming less expensive for the foreseeable future, but instead see it putting pressure on the segment,” Zaffino said.

“We plan to set up a structure that over time we expect to be supported by third party providers in addition to AIG.”

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