{"id":508343,"date":"2026-01-11T10:59:11","date_gmt":"2026-01-11T10:59:11","guid":{"rendered":"https:\/\/www.europesays.com\/us\/508343\/"},"modified":"2026-01-11T10:59:11","modified_gmt":"2026-01-11T10:59:11","slug":"aig-edges-back-towards-risk-two-decades-after-financial-crisis-bailout","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/508343\/","title":{"rendered":"AIG edges back towards risk two decades after financial crisis bailout"},"content":{"rendered":"

AIG has spent the best part of the past two decades pulling back from activities that helped bring it \u2014 and the global financial system \u2014 to the brink of collapse.<\/p>\n

But when chief executive Peter Zaffino appeared on stage last year with Palantir\u2019s Alex Karp, it was the latest signal that the century-old New York insurer was trying to take on more risk again.<\/p>\n

\u201cI can\u2019t believe you\u2019re willing to be seen in public with us,\u201d joked Karp, who has courted controversy<\/a> as the outspoken boss of the data intelligence company.<\/p>\n

At its peak in 2000, before it helped bring down the US housing market with its risky financial bets on subprime mortgages, AIG<\/a> was a $230bn financial services group operating in about 130 countries.\u00a0<\/p>\n

\u201cAlmost all of that has been stripped away,\u201d said Paul Newsome, an analyst at Piper Sandler. <\/p>\n

Zaffino has come to symbolise the rebirth of AIG \u2014 now a $46bn insurer mostly focused on the US \u2014 as a relatively conservative insurance<\/a> carrier that is a fraction of its former size. <\/p>\n

Since taking over in 2021 Zaffino has helped restore a lossmaking insurance portfolio to profitability, shaving roughly $1tn in risk exposure and selling almost all of the group\u2019s stake in its life and asset management business.<\/p>\n

However, at the event with Karp, Zaffino was promoting AIG\u2019s hopes to use artificial intelligence to underwrite more risk, part of a broader effort to persuade investors he could deliver the final phase of AIG\u2019s turnaround: growth. <\/p>\n

AIG has \u201creally been shrunk down massively\u201d, said Newsome. \u201cThey need to add more business.\u201d<\/p>\n

But the re-risking pitch just became harder to make.<\/p>\n

\"TwoAt its peak in 2000 AIG was a $230bn financial services group operating in about 130 countries \u00a9 Brendan McDermid\/Reuters<\/p>\n

Zaffino on Tuesday announced that he would step down as chief executive in a move that sent AIG\u2019s shares sliding 7 per cent. The company said he would be replaced by Eric Andersen<\/a>, a longtime executive at broker Aon whom analysts described as experienced but relatively unknown.<\/p>\n

One person familiar with Zaffino\u2019s thinking said he planned to continue \u201csetting the strategic course\u201d in a new role as executive chair, while Andersen, who is to join as president before taking over as chief executive in June, would manage daily operations.<\/p>\n

The appointment follows a tumultuous succession planning process at AIG.<\/p>\n

The company in November cancelled the appointment of John Neal, the former chief executive of Lloyd\u2019s of London, as president of AIG\u2019s US group. <\/p>\n

Neal, who had been widely seen as next in line for the chief executive role, faced an inquiry by Lloyd\u2019s into possible governance failings<\/a> connected to a close personal relationship with a woman appointed to the market\u2019s executive committee.<\/p>\n

AIG nearly collapsed in 2008 because of its multibillion-dollar bets in the credit default swaps market, but received a $185bn taxpayer bailout. Then, for more than a decade, it booked heavy losses on its insurance underwriting. Analysts said the company\u2019s risk appetite remained too high in the decade after the financial crisis and that it did a poor job vetting clients.<\/p>\n

AIG took \u201cenormous amounts of risk on individual accounts, instead of selecting pieces of an account\u2019s insurance risk\u201d, said Meyer Shields, an analyst at KBW. <\/p>\n

For example, it would boldly agree up to $1bn in insurance coverage for a single building, Shields said, rather than taking a slice of the risk \u2014 a strategy that made it popular with clients but led to deep losses.<\/p>\n

Zaffino has steered a more conservative course and bought large amounts of reinsurance \u2014 coverage for insurers \u2014 to trim AIG\u2019s volatility.\u00a0<\/p>\n

That brought losses under control, but the group has underperformed the broader US insurance sector since 2018, missing out on a highly profitable period.<\/p>\n

The insurance industry has enjoyed a bull run of profits<\/a> for the past two years, buoyed by price rises in 2023 and more restrictive terms and conditions that have helped carriers trim payouts. <\/p>\n

\"Line<\/p>\n

AIG will be fighting to win more business as the property and casualty insurance sector enters a downturn, with prices now falling due to an influx of capital<\/a>.<\/p>\n

As part of its re-risking drive, AIG announced in October that it would buy stakes in speciality insurer Convex and its private equity owner Onex in a deal worth more than $2.7bn.<\/p>\n

Convex, founded by London market veteran Stephen Catlin, specialises in niche lines of business such as cyber attacks, terrorism and credit default risk. Catlin told the FT that part of Convex\u2019s appeal to AIG was its expertise in particularly complex or risky lines of business.<\/p>\n

\u201cCredit insurance is, in the current global geopolitical environment, quite a hairy risk to write,\u201d he said, adding that political volatility had amplified default risk on some investment projects: \u201cWho knows what [Vladimir] Putin or Xi [Jinping] or [Donald] Trump\u2019s going to do?\u201d\u00a0<\/p>\n

Convex\u2019s credit insurance business includes so-called significant risk transfers, in which insurers agree to cover the default risk of loans for banks or private credit lenders, a practice with echoes of the credit default swaps that helped bring down AIG in 2008.<\/p>\n

However, Shields said today\u2019s credit insurance market was \u201cnowhere near as unregulated, unsupervised, as it was back then\u201d.<\/p>\n

\"RobertFormer AIG chief executives Robert Willumstad and Martin Sullivan at a congressional hearing in October 2008 \u00a9 Jay Mallin\/ZUMA Press Wire via Reuters<\/p>\n

AIG last year announced a $2bn deal for the rights to access the client base of reinsurer Everest, highlighting the challenges it faces in growing its business organically in a crowded market.<\/p>\n

The company has also struck multiple reinsurance deals with Blackstone in which the alternative assets giant covers riskier portions of AIG\u2019s insurance portfolio in exchange for a premium. The companies tapped Palantir to vet the portfolio of the most recent $300mn vehicle.<\/p>\n

Zaffino said in September that AIG had pared back its investments in hedge fund strategies and alternative assets but now planned to grow in those areas.<\/p>\n

\u201cWe were so conservative in terms of the overall percentage of asset allocation\u201d to alternatives, he said, adding that the company saw potential profit in more illiquid investments, a strategy that was \u201cnot that complex\u201d.<\/p>\n

The market will be closely watching the group\u2019s re-risking efforts under Andersen, according to analysts, given AIG\u2019s brand and its reputation for clever innovation, alongside more dubious risk-taking.<\/p>\n

\u201cAIG may no longer be the 800-pound gorilla in the industry,\u201d said Shields, but \u201cit matters\u201d.<\/p>\n","protected":false},"excerpt":{"rendered":"AIG has spent the best part of the past two decades pulling back from activities that helped bring…\n","protected":false},"author":3,"featured_media":508344,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,79,67,132,68],"class_list":{"0":"post-508343","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-united-states","11":"tag-unitedstates","12":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115876119576916007","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/508343","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=508343"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/508343\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/508344"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=508343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=508343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=508343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}