Posted On: March 19, 2009, 11:41 am CDT

Posted By: Bill

Brokers have to market EVERYTHING AIG at their clients' urging. AIG is well aware this occurs. Competitors then quote AIG renewals extremely low in an effort to "buy" new business. AIG is awarded last look by insureds(which is fair), determines if the risk is worth the subsequent reduction, and proceeds in the manner they choose appropriate.

Regardless of the pricing outcome, the proximate reason the rates were driven down was competition caused by problems at the parent level. AIG would love to be able to maintain rates. The P&C people at AIG have all the incentive in the world to maintain rating, but it is impossible when all renewal business is being marketed all the time. I assume it is extremely important for AIG to renew accounts, at any cost, when the new business has been stymied by the general opinion of the buying public and deteriorating economy.

I honestly believe that the sour grapes result from other markets believing they were in for an increase in premium revenue while a major competitor was wounded. I doubt many AIG competitors are having their key renewals marketed at the rate AIG is. When one is, which is probably rare, AIG is simply returning the rate slashing favor. I think the result is draw and commensurate with the Inurance Commisioners' rulings.

The AIG parent issues certainly prolonged the soft market, but time will eventually work the issues out. A healthy marketplace includes AIG's capacity, expertise, and employees. There is so much whining going on right now. Wake me up in 1 year.