Reinsurance Trends and Catastrophe Losses: Insights from AIG’s Peter Zaffino
In a recent earnings call, American International Group (AIG) CEO Peter Zaffino highlighted significant trends in the reinsurance market, particularly regarding the potential for a staggering $200 billion in insured catastrophe losses in 2025. This forecast could signal a major shift in the insurance landscape, urging industry players to reassess their strategies and risk management approaches.
The Rise of Catastrophe Losses
Zaffino emphasized the growing trend of higher reinsurance retentions, which has resulted in primary insurers retaining a larger share of catastrophe losses. In 2023 and 2024, primary insurers absorbed as much as 90% of these losses, a stark contrast to the historical norm of a 50/50 split between insurers and reinsurers. This shift raises critical questions about the sustainability of current insurance models and the industry’s ability to manage escalating risks.
The Impact of Natural Disasters
The conversation around catastrophe losses is particularly relevant given the increasing frequency and severity of natural disasters. Zaffino pointed out that the average insured losses over the past eight years have exceeded $140 billion, with 2025 potentially setting new records. For instance, the California wildfires alone could lead to insured losses of around $50 billion, marking the first quarter of 2025 as one of the costliest on record for natural catastrophes.
Analyzing the Protection Gap
A significant concern raised by Zaffino is the widening protection gap in the insurance market. The economic impact of the January wildfires could surpass $250 billion, highlighting a troubling trend where insurance coverage typically accounts for only 40% to 50% of total economic losses during major catastrophic events. This gap underscores the pressing need for innovative insurance solutions that can better address the risks posed by secondary perils and tail events.
AIG’s Strategic Response
In light of these challenges, AIG has prioritized maintaining lower excess-of-loss attachment points and securing meaningful aggregate coverage. Zaffino noted that the company had a strong reinsurance renewal season at the beginning of the year, successfully improving or maintaining ceding commission levels across major proportional treaties. This strategic focus reflects AIG’s commitment to leveraging its underwriting expertise and market leadership to navigate the evolving landscape effectively.
The Future of Reinsurance
As the industry braces for what could be a recalibrated approach to managing catastrophe risks, Zaffino’s insights serve as a call to action for insurers and reinsurers alike. The increasing severity of natural disasters, combined with the financial implications of higher retention rates, necessitates a reevaluation of risk management strategies and a commitment to innovative solutions that can bridge the protection gap.
Final Thoughts
In summary, the insights shared by Peter Zaffino during AIG’s earnings call shed light on the critical challenges facing the insurance industry today. With the potential for unprecedented catastrophe losses on the horizon, stakeholders must adapt to the changing landscape and prioritize strategic risk management to ensure long-term sustainability.
For more information on AIG’s approach to catastrophe losses and the broader implications for the insurance industry, visit Insurance Journal.