AIG woes offer double benefit for insurance rivals

LONDON (Reuters)—Insurance rivals stand to reap the benefits from the woes of American International Group Inc., snapping up assets AIG is forced to sell while gaining greater pricing power as AIG pulls in its claws.

Zurich Financial Services and other insurance rivals are the possible winners say analysts who see AIG emerging from its current troubles with less weight to throw around.

"The first consequence we see is that it should be a positive for the P&C (property and casualty) industry," said JPMorgan analysts in a research note.

"This effectively represents a withdrawal of capacity (or capital) from the marketplace...Pricing in the P&C market is driven by capital—the less capital, the less pressure there is for prices to fall."The likely withdrawal of billions of dollars of AIG capital from the sector will put a brake on the slide in prices in the commercial insurance market, where premiums had been forecast to fall by up to 20% due to intense competition.

AIG has for a long time been a dominant player in corporate insurance, with an 11% share in the U.S. market, as well as for other big-ticket risks such as aviation.

Now, intermediaries predict that although AIG will continue underwriting, it is likely to lose business clients.

"In our view, ZFS is probably the clearest winner," said JPMorgan.

One senior executive at an insurance broker who spoke on condition of anonymity saw others benefiting as well: "Zurich and ACE are likely to be the beneficiaries, maybe even AXA. Anyone with a multinational network will be a winner."
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