American International Group Inc. Chief Executive Officer Peter Zaffino said the biggest challenge to the insurance sector over the last decade has been “unpredictable risks” including the pandemic, wars and climate change.
“We’ve had 100 natural disasters reported through nine months of this year,” Zaffino said during an interview for an upcoming episode of “The David Rubenstein Show: Peer to Peer Conversations.” “That just hasn’t happened in the past.”
Zaffino joined AIG in 2017, becoming CEO in 2021. During his tenure, the industry has been battered by everything from cyber attacks to catastrophic weather events supercharged by climate change. Natural disasters alone inflicted $275 billion in damages across the world last year, with $125 billion of that covered by insurance, according to a report by Swiss Re.
Worsening disasters in markets where regulations or laws already make it difficult for insurers to operate profitably have prompted some firms to cut their losses. AIG has pulled away from writing some business in California, while other insurers have taken similar steps in that state as well as in Florida.
California — where regulations make it difficult for insurers to secure rate increases of significant size or use sophisticated computer models in underwriting — is looking to win back insurers that have left by introducing reforms meant to make things easier on them. The AIG CEO said California’s regulator has made “a lot of progress” in remedying the situation.
“There’s so many different components that go into pricing homeowners in areas that have significant exposure such as wildfire, hurricane, earthquake, and they’ve allowed a couple of different variables to go into the pricing, such as reinsurance,” Zaffino said. “And so I think it is a very positive step forward, but it’s still not without its complications.”