AIG’s property underwriting response to crisis a bellwether for hard or soft market in 2009

Whether or not today’s financial crisis leads to hardening of the property insurance market in the future depends to some extent on how AIG/Lexington’s underwriting responds to the crisis, according to a Willis publication.
“We do not want to over-sensationalize the AIG crisis, but we do think a significant amount hinges on how AIG/Lexington chooses to proceed from this crisis in terms of its property underwriting philosophies,” says an inaugural November 2008 publication by Willis called Marketplace Realities.
Lexington in particular currently holds “aggressive and critical positions” on a sizeable percentage of major property placements throughout the world, the publication observes.
“Will AIG continue to underwrite aggressively to maintain market share, stave off competition from the balance of the market and continue to prove to clients that business as usual continues on the underwriting side?” Marketplace Realities asks in a specific section on property lines.
“Or will they opt to take a more conservative stance to ensure that underwriting results are as healthy as possible as the parent attempts to emerge from the terms of its loan pact with the government?
“The answer to these questions will tell us a great deal about what market we are facing heading into 2009.”
On balance, considering all of the factors in play, does Willis see a hardening market in 2009?
“Even a few weeks ago, we would have said no, despite all of the evidence presented above,” the article concludes, adding that under no circumstances does it see a hard market developing overnight.
“What we are saying is that there are enough indicators, without taking into account the AIG scenarios, to suggest we have reached the bottom of the soft market cycle and market tightening is imminent.”