Competitors Offer to Fill the Gaps

There have been some subtle and not-so-subtle moves by competitors in reaction to AIG’s troubles.

Navigators Pro increased its capacity for directors and officers (D&O) liability insurance, citing the “unprecedented risks” facing corporate directors in the current volatile financial marketplace. Chris Duca, president of Navigators Pro, suggested the move also came as a result of customer demand. “The request of our D&O policyholders and insurance brokers to increase capacity is being driven in part by the flight to quality,” he said.

ACE USA increased capacity in its management and professional liability, commercial umbrella and excess casualty, and medical professional lines of business to $50 million from $25 million. In announcing the move, John Lupica, president and CEO, noted that the long-tail nature of these liabilities “underscores the importance of partnering with a financially strong insurer.”

Also, Travelers Insurance and Chubb Corp. stopped issuing surety bonds with AIG as a co-participant, according to insurance brokerage Marsh Inc. “This only affects future bonds,” said Mark Nickel, head of surety for Marsh.

AIG spokesman Peter Tulupman told Reuters in its report on surety bonds that AIG was “disappointed that competitors are trying to take advantage of the current situation.”

Even AIG subsidiaries are making moves. Its own surplus lines insurer, Lexington Insurance Co., moved to shore up confidence among brokers and customers by arranging a contingent property reinsurance cover from Berkshire Hathaway’s National Indemnity Co. for its real estate portfolio. The cover is also for policies having limits of $250 million or greater, policies with home and foreign exposure and the property sections of most of Lexington’s homeowners book.

“This support from AAA-rated, Berkshire Hathaway speaks volumes about Lexington’s true financial strength and affirms its pivotal role and leadership position in the marketplace,” said Kevin Kelley, chairman and CEO of Lexington Insurance Co.

Producers’ comments in the Insurance Journal survey, “AIG in Crisis,” indicate that scrambling for AIG accounts began even before the ink was dry on the $85 billion loan.

“We have seen and heard from marketing of other insurers for our AIG business,” an agent wrote.

“They are already campaigning for the business,” another producer said of the carriers he represents.

“We have received e-mails and calls from Travelers, Zurich, CNA and Fireman’s Fund,” reported another.

One agent said one of his agency’s personal auto carriers is already offering agencies a bonus for AIG accounts.

If AIG loses business, which of its competitors will gain?

AIG is so big and covers so many markets, the winners could be spread out among major international carriers, large commercial writers, surplus and specialty lines carriers, even regional carriers, according to producers.

Zurich, Travelers, Chubb, The Hartford and Liberty Mutual are among the carriers respondents to the IJ survey cited most often as potential winners, along with Lloyd’s and various surplus lines and specialty companies. The large surplus lines carrier, Lexingon Insurance, is among AIG’s companies.

“I think anybody with the ability to compete with AIG will now have an advantage over them,” one producer wrote.

“The big names like Travelers or Hartford or even Lloyd’s on the odd accounts will be able to use their financial strength to gain an advantage,” said one survey respondent.

“I think agents and insureds will look for smaller, regional carriers, thinking this is safer,” added another.