Although mentioned, the article didn’t dig very deeply into the impact AIG has had and will continue to have on current and future reserve adequacy. AIG has shortchanged loss reserves to the tune of several billions of dollars over the past decade with still no end in sight. Nobody knows the extent of AIG’s under reserving other than to know it exists. That being said and AIG being as big as they are, who really knows industry reserve adequacies? Truth is, nobody does. As such I’d take these findings with a grain of salt.
No end in sight? Don’t claims eventually close with or without payment? Older accident years / policy years will close with reserve strengthenings, and newer policy years or accident years will be (more) adequately reserved due to the scrutiny by the external reserve review actuaries after the near meltdown of AIG in 2008.
An end can come once a company folds up tent and writes no more business. AIG is still the biggest P&C company out there and is still writing business. The sis they committed in the 90’s and early 2000’s came to fruition starting in the 2008-2012 era. The sins they committed in 2005-2010 started to come to fruition 2012 and after. The sins they are committing today (and I see their bad underwriting decisions on a daily basis) will begin to manifest themselves in future years. Have they made corrections? Sure. But are they adequate, only time will tell. I tend to think not. but we will see. You don’t spend $10 billion o $20 billion of reinsurance protection for development of old losses unless you expect a lot more development of old losses. Unless you’re a bad business person. No, the end is not yet in sight.
Although mentioned, the article didn’t dig very deeply into the impact AIG has had and will continue to have on current and future reserve adequacy. AIG has shortchanged loss reserves to the tune of several billions of dollars over the past decade with still no end in sight. Nobody knows the extent of AIG’s under reserving other than to know it exists. That being said and AIG being as big as they are, who really knows industry reserve adequacies? Truth is, nobody does. As such I’d take these findings with a grain of salt.
No end in sight? Don’t claims eventually close with or without payment? Older accident years / policy years will close with reserve strengthenings, and newer policy years or accident years will be (more) adequately reserved due to the scrutiny by the external reserve review actuaries after the near meltdown of AIG in 2008.
An end can come once a company folds up tent and writes no more business. AIG is still the biggest P&C company out there and is still writing business. The sis they committed in the 90’s and early 2000’s came to fruition starting in the 2008-2012 era. The sins they committed in 2005-2010 started to come to fruition 2012 and after. The sins they are committing today (and I see their bad underwriting decisions on a daily basis) will begin to manifest themselves in future years. Have they made corrections? Sure. But are they adequate, only time will tell. I tend to think not. but we will see. You don’t spend $10 billion o $20 billion of reinsurance protection for development of old losses unless you expect a lot more development of old losses. Unless you’re a bad business person. No, the end is not yet in sight.