AIG’s Zaffino Warns of Growing Insurer-Reinsurer Imbalance Amid Rising Catastrophe Costs

AIG CEO Peter Zaffino highlighted shifting reinsurance dynamics during the company’s Q4 earnings call, stressing how insurers are absorbing more catastrophe losses. He warned that 2025 could bring $200 billion in insured catastrophe damages, reshaping the industry.

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“This could change the entire insurance landscape,” Zaffino told analysts.

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In late 2024, he noted that January 1 renewals would maintain high attachment points, keeping primary insurers responsible for a majority of losses. The latest call reinforced that trend, with insurers retaining up to 90% of catastrophe risks in 2023 and 2024, compared to the pre-2023 50/50 split between insurers and reinsurers. He pointed to Hurricane Katrina, where insurers covered half of the total losses.

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AIG continues to prioritize lower excess-of-loss attachment points and aggregate coverage, Zaffino explained. Catastrophe years now regularly surpass $140 billion, significantly higher than the $100 billion threshold from 15 years ago. The start of 2025 already indicates another high-loss year.

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“In a historically low-loss period, California wildfires could make Q1 2025 the second costliest first quarter for catastrophes ever recorded,” Zaffino noted.

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If wildfire-related insured losses reach $50 billion—at the high end of expert estimates—paired with the average $140 billion in annual catastrophe losses, a $200 billion catastrophe year in 2025 seems increasingly likely.

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Zaffino also pointed out the widening protection gap. Economic losses from January wildfires alone could exceed $250 billion.

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“Compare that to the top 10 catastrophic events in history, where insurers typically covered 40% to 50% of economic losses,” Zaffino said. He emphasized how wildfires illustrate growing secondary peril risks and how current models struggle to capture extreme events.

Despite the challenging market, AIG had a strong January 1 reinsurance renewal season, Zaffino stated.

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“For our major proportional treaties, we either maintained or improved ceding commission levels—reinforcing our underwriting strength and leadership across multiple sectors,” he said.

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Strategic underwriting decisions, including reduced exposure in California over the past few years, should help limit AIG’s wildfire-related losses to approximately $500 million before reinstatement premiums, Zaffino added.

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