A.M. Best rating firm executives said that despite the impacts of recent hurricanes and the American International Group financial crisis, its outlook for the property-casualty insurance sector is stable.
Speaking during a telephone conference call, they generally expressed cautious confidence in AIG despite its current difficulties, and said the rest of the market is generally solid.
For the market as a whole, they said insurers at this point still have a financial cushion based on the previous hard market pricing levels.
Hurricane Ike will rank as one of the top five most costly insurance catastrophes, but its losses will have only a modest impact, which is indicative of the overall strength of the industry, said Richard Attansio, Best vice president of U.S. personal lines.
The Best experts said they see a short- term stabilization of pricing, but the long-term trends are for a decrease.
AIG’s problems were not seen as impacting pricing.
The company, which needed an $85 billion government loan to stay afloat, for its property-casualty units still has ratings that “fall within our excellent category,” noted Anthony Diodato, group vice president U.S. property-casualty ratings.
Still, he said it would be premature to declare any sense of stability for the company, and Best is maintaining “negative implications” on the firm’s ratings.
AIG was described as “a formidable player in the property-casualty marketplace despite an erosion of confidence by brokers, banks and key credit facilities.”
Best executives said AIG management has told them that they have been meeting with large brokerage teams, that there has been a favorable response, and the firm does not “see them running away.”
The rating firm said it had heard of some policyholders moving away, but it expected AIG would fight to keep its business. The executives said that AIG will have to focus on maintaining its staff and underwriting teams.
Generally, for most other p-c firms, problems related to subprime loans have been manageable, Best said, but the rating agency continues to stay on top of carriers with questions when potential vulnerability is seen.
Meanwhile, in another AIG rating development, London-based investment firm Fox-Pitt Cochran Caronia Waller said AIG has a limited or unclear upside and it was downgrading it to “in-line” from “outperform.”