Below is a summary of our report on what 611 commercial insurance brokers had to say about the AIG situation. For the full report click here.
I thought it noteworthy that 47% of brokers said they believe the AIG commercial insurance units will be broken up and they had concerns such as one broker saying "AIG's book of multinationals needs all the the p&c Companies to stay in place worldwide."
AIG uses its marketshare as leverage and this isn't always appreciated, as one broker said, "Couldn't have happened to a more appropriate carrier! As you sow, so shall you reap!"
Others disagreed: "The knee jerk reaction by some brokers to replace AIG is insane. This is not the revenge of Kemper or Reliance, and it's unfortunate that there are so many ignorant brokers out there."
With AIG's stock down over 90% and shareholders diluted 79.9%, AIG employees with stock compensation and stock in their retirement accounts are hurting and other carriers are poaching talent as quickly as they can. One broker summed up their concern as follow "It will be difficult to continue doing business with AIG as in all probabliity the personnel at AIG will change with good people finding new positions with more promise then a wounded AIG can offer.
Some brokers thought they would be comedians: "If AIG fights to to pay claims for/to its insureds, what logic says that AIG will repay its loans to the federal government?"
Some showed appreciation for Advisen which I appreciated, "Thanks for conducting this survey -- I've been curious about what other insurance executives think."
Below is the press release. Contact me if you have questions or trouble getting the full report.
SECOND ADVISEN SURVEY SHOWS THAT BROKERS ARE MORE CONFIDENT THAN RISK MANAGERS IN FINANCIAL SECURITY OF AIG COMMERCIAL INSURANCE UNITS
HOWEVER 47% OF BROKERS BELIEVE AIG WILL HAVE TO SELL SOME UNITS; CONCERN EXPRESSED
New York. October 7, 2008 – Advisen Ltd., the leading provider of content, analytics, and technology to the global commercial insurance industry, today released a special report based on a survey of brokers following the American International Group (AIG) liquidity crisis. On the heels of a similar survey of risk managers, Advisen sought to measure brokers’ confidence in AIG after the $85 billion loan by the federal government. “Wary” was how the vast majority of brokers characterized the attitude of their clients towards the unfolding situation at AIG, but with only one respondent claiming that clients are “panicked”, most brokers of commercial insurance are confident in AIG after the federal loan and few are recommending clients switch from AIG.
The Advisen survey of risk managers found that about two thirds intend to get quotes from AIG’s competitors at policy renewal, but according to the broker survey, few buyers have yet given their broker firm instructions to replace AIG. Brokers also opined in survey results about the potential impact the insurance pricing cycle and the potential impact on their fee and brokerage income.
“Survey results show that brokers have communicated to policyholders that AIG’s insurance subsidiaries are secure,” said David K. Bradford, EVP and Chief Knowledge Officer of Advisen. “However, while brokers have been a force for calm in the marketplace, survey responses indicate that brokers don’t yet know how much diversification clients will seek, or whether this crisis will impact overall market pricing or brokerage income.”
This Special Report is based an exclusive survey conducted by Advisen from September 26th-30th with 611 respondents Almost 65 percent of respondents described themselves as “executive management.” Eleven percent classified themselves as “producer,” and a similar number as “marketer/broker.” Almost 20 percent of participants worked for one of the four largest brokers.
“In conversations with brokerage firm executives attending this week’s CIAB Insurance Leadership Forum the story lines are the same as when we surveyed brokers a week ago” said Thomas P. Ruggieri, CEO of Advisen from the conference in Las Vegas. “Execution risk of the asset sales has been cited as a common concern among brokers. They also worry about potential of breaking up the commercial P&C units. While brokers are watching ratings actions carefully, they are comfortable with the present security of AIG’s property & casualty subsidiaries.”
The eleven-page Advisen Special Report on the Broker survey results is available here: