AIG CEO sees 'huge potential' in investor market for insurance risk
Source: Asia Insurance Review | Oct 2018
AIG CEO Brian Duperreault, keynoter for the upcomimg 15th SIRC, sees ‘huge potential’ within the insurer’s portfolio for use of a market in which investors trade assets tied to insurance liabilities.
The insurance-linked securities (ILS) market, which developed over the past couple of decades as a way for insurers to pass on to investors some of their risks, mainly those associated with natural disasters, is a “good tool,” Mr Duperreault said at an insurance conference sponsored by investment bank KBW, a unit of Stifel Financial Corp.
“I think you’re going to see more of it, not less of it,” within AIG, he said.
Insurance companies that participate in the market typically issue CAT bonds. If no catastrophe hits, the bonds pay out a percentage of the premiums by way of coupons. But if a disaster does occur, the insurance company can use the funds to pay claims to its policy holders.
AIG’s acquisition of Bermuda-based Validus Holdings, which was finalised in July, included Validus’ AlphaCat unit, an investment adviser that manages capital for investors and AIG through insurance-linked securities and other investments.
The insurance-linked securities market gives insurers another way for their underwriters to match risks they take on with sources of capital to cover potential claims, he said. A